Other things held constant,a high degree of total leverage will mean that a relatively small change in sales will result in a large change in EPS.

Question

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When a company has a high degree of total leverage, it means that it has significant fixed costs (such as interest payments on debt). This fixed cost component magnifies the effect of changes in sales on earnings per share (EPS). Therefore, a relatively small change in sales will result in a large change in EPS when a company has high leverage.

Other Things Held Constant,a High Degree of Total Leverage Will