After completing an EPS/EBIT analysis, what conclusions would you make if the debt line is above the stock line throughout the range of EBIT on the graph?
A) Debt appears to be the best financing alternative.
B) Stock would be the best financing alternative.
C) A combination of debt and stock is probably the best financial alternative.
D) Dividends must be considered before conclusions can be made.
E) The company should be privately owned.

Question

Quizplus · Accepted Answer

If the debt line is above the stock line throughout the range of EBIT, it indicates that using debt financing results in higher EPS than using stock financing, making debt the better option.

After Completing an EPS/EBIT Analysis, What Conclusions Would You Make