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Advantage of debt financing

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Reference no: EM131533058

1. Which of the following is an indication of a firm's risk with its capital structure?

       Indifference point

       Coefficient of variation

       Earnings per share

       Net operating income

       Weighted average cost of capital

2. Which of the following is an advantage of debt financing?

       Interest charges on debt is very minimal.

       Interest charges on debt are tax deductible.

       Interest charges on debt are based on the net income of the firm.

       The higher the interest charges, the lower the bankruptcy costs.

       Firms that are entirely debt financed have to pay very minimal taxes.

3. Which of the following is an example of business risk?

       Default risk

       Prepayment risk

       Strategic risk

       Currency risk

       Equity risk

4. The percentage change in earnings per share (EPS) that results from a given percentage change in sales is known as the _____.

       degree of financial leverage

       degree of operating leverage

       degree of working capital leverage

       degree of current asset leverage

       degree of total leverage

Reference no: EM131533058

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