Which of the following statements is CORRECT?
A)An increase in fixed costs, (holding sales and variable costs constant) will reduce the company's degree of operating leverage.
B)An increase in interest expense will reduce the company's degree of financial leverage.
C)If the company has no debt outstanding, then its degree of total leverage equals its degree of operating leverage.
D)If a firm's degree of operating leverage increases, its degree of financial leverage must also have increased.
E)If the company has no debt outstanding, then its degree of total leverage equals its degree of financial leverage.

Question

Quizplus · Accepted Answer

If a company has no debt, its financial leverage is zero, so its total leverage is solely determined by its operating leverage.

Which of the Following Statements Is CORRECT