The degree of financial leverage is defined as _____.
A) the percentage change in EBIT that results from a given percentage change in sales
B) the percentage change in sales that results from a given percentage change in EPS
C) the percentage change in EPS that results from a given percentage change in sales
D) the percentage change in EPS that results from a given percentage change in EBIT
E) the percentage change in sales that results from a given percentage change in EBIT

Question

Quizplus · Accepted Answer

The degree of financial leverage measures how sensitive the earnings per share (EPS) is to changes in earnings before interest and taxes (EBIT), indicating the impact of fixed financial costs.

The Degree of Financial Leverage Is Defined as _____