EBIT/EPS analysis allows managers to see how different capital structures affect the earnings levels of their firms.

Question

Quizplus · Accepted Answer

EBIT/EPS analysis is a tool for determining the impact of different capital structures on a firm's earnings per share (EPS). By comparing the EPS at different levels of EBIT, managers can evaluate the tradeoffs between risk and return associated with various financial structures. Therefore, the statement is true.

EBIT/EPS Analysis Allows Managers to See How Different Capital Structures