Which of the following is/are helpful for evaluating the effect of leverage on a company's risk and potential returns?
I.Estimated pro forma coverage ratios
II.The recognition that financing decisions do not affect firm or shareholder value
III.A range of earnings chart and proximity of expected EBIT to the breakeven value
IV.A conservative debt policy that obviates the need to evaluate risk

Question

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Estimated pro forma coverage ratios (I) can help evaluate how much debt a company can take on without sacrificing its ability to make interest payments. A range of earnings chart and proximity of expected EBIT to the breakeven value (III) can help evaluate potential risk and returns. The recognition that financing decisions do not affect firm or shareholder value (II) is incorrect as financing decisions can affect both. A conservative debt policy that obviates the need to evaluate risk (IV) is not helpful for evaluating the effect of leverage on a company's risk and potential returns.

Which of the Following Is/are Helpful for Evaluating the Effect