Provided a firm does not use an extreme amount of debt,financial leverage typically affects both EPS and EBIT,while operating leverage affects only EBIT.

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Quizplus · Accepted Answer

Financial leverage affects both EPS (Earnings Per Share) and EBIT (Earnings Before Interest and Taxes) because it involves the use of debt, which impacts interest payments and thus both measures. Operating leverage, however, primarily affects EBIT through changes in sales volume and operational efficiency, not EPS directly.

Provided a Firm Does Not Use an Extreme Amount of Debt,financial