Financial leverage is direct function of the ratio

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Reference no: EM131825739

1. Which of the following is true of financial leverage?

a. It affects the sensitivity of net income to changes in sales.

b. a and b

c. It is increased by an increase in operating leverage.

d. It arises from the use of debt financing.

2. Financial leverage is a direct function of the ratio of:

a. EBIT to sales.

b. net income to sales.

c. interest expense to EBIT.

d. net income to the number of shares of common stock.

Reference no: EM131825739

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