The degree of financial leverage is concerned with the relationship between
A) changes in volume and changes in EPS.
B) changes in volume and changes in EBIT.
C) changes in EBIT and changes in EPS.
D) changes in EBIT and changes in operating income.

Question

Quizplus · Accepted Answer

The degree of financial leverage is focused on the impact of changes in EBIT (earnings before interest and taxes) on EPS (earnings per share). It measures the percentage change in EPS due to a percentage change in EBIT. Therefore, option C is the correct answer. Options A, B, and D are not related to the degree of financial leverage.

The Degree of Financial Leverage Is Concerned with the Relationship