CAPITAL STRUCTURE, LEVERAGE AND FINANCIAL RISK

CAPITAL STRUCTURE, LEVERAGE AND FINANCIAL RISK

University

20 Qs

quiz-placeholder

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CAPITAL STRUCTURE, LEVERAGE AND FINANCIAL RISK

CAPITAL STRUCTURE, LEVERAGE AND FINANCIAL RISK

Assessment

Quiz

Other

University

Practice Problem

Hard

Created by

HAZWANI AZAM

Used 23+ times

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20 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Operating leverage occurs due to the existing of ______ in the firm

variable cost

operating cost

fixed cost

EBIT

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The following statements are true regarding operating leverage EXCEPT

A change in the volume of sales results in an "equal" change in operating profit (or loss).

Operating leverage will magnify the effects of changes in sales on the firm’s earnings before interest and taxes

A relative small change in sales will lead to large change in the firm’s EBIT

Operating leverage concerns with the usage of fixed cost in a firm

3.

MULTIPLE CHOICE QUESTION

30 sec • Ungraded

Operating leverage is also known as 'gearing'

Yes

No

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Choose the CORRECT statement

Financial leverage concerns with the use of fixed costs by the firm for production

Operating leverage concerns with the use of fixed financing costs by the firm

Financial leverage is acquired by choice to increase the profit

Degree of total leverage measures the sensitivity of earnings per share to the change in sales

5.

FILL IN THE BLANK QUESTION

1 min • 1 pt

DOL is a quantitative measure of the _________ of a firm’s operating profit to a change in the firm’s sales

6.

FILL IN THE BLANK QUESTION

1 min • 1 pt

The closer that a firm operates to its break-even point, the ________ is the absolute value of its DOL.

7.

FILL IN THE BLANK QUESTION

1 min • 1 pt

The debt financing variability in earnings per share is due to the ______ payment

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