Through the effects of financial leverage, when EBIT decreases, earnings per share will
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Through the effects of financial leverage, when EBIT decreases, earnings per share will
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- Financial leverage measures how much earnings per share (and ROE) respond to changes in debt. True or Falsea) Define financial leverage.b) What is the effect on earnings?c) When is the use of financial leverage advantageous and disadvantageous?what reduces both basic earnings and dilluted earnings per share?
- The tendency of the return on stockholders' equity to vary disproportionately from the return on total assets is because ofa. leverageb. solvencyc. Yieldd. quick assetsIn the MM model, as the proportion of debt in the capital structure increases, the cost of equity a. increases. b. decreases. c. remains unchanged; there is no relationship between the two. d. initially rises rapidly, then increases slowly beyond some point.Does decreasing net margin percentages and slightly increasing financial leverage have an effect on Return on Equity (ROE)?. If Yes, What should a company do to solve such problem.
- What is the effect of an increase in the cost of capital on the payback period, profitability index and accounting rate of return? Payback period will increase, Profitability will decrease, and Accounting rate of return will increase. Payback period will not change, Profitability will decrease, and Accounting rate of return will not change. Payback period will not change, Profitability will increase, and Accounting rate of return will decrease. Payback period will decrease, Profitability will increase, and Accounting rate of return will decrease.Why dividen yield ratio increase while dividend payout ratio decrease? please explainIf a firm increases its leverage, which extended Du Pont equation ratio is directly affected? a. ROS b. Equity Multiplier c. Total Asset Turnover d. ROA
- What is positive and negative financial leverage? How are returns or losses magnified as the degree of leverage increases? How does leverage on a before-tax basis differ from leverage on an after-tax basis?what are the shortcomings/ risk implications of improving net profit margin to increase Return on Equity?When is potentially dilutive security anti-dilutive? A. The definition of diluted earnings per share requires that diluted earnings per share reflect the best-case scenario or maximum potential decrease in EPS. So if security decreases the earnings per share ratio, it is, by definition, anti-dilutive. B. The definition of diluted earnings per share requires that diluted earnings per share reflect the worst-case scenario or maximum potential decrease in EPS. So if security increases the earnings per share ratio, it is, by definition, anti-dilutive. C. The definition of diluted earnings per share requires that diluted earnings per share reflect the best-case scenario or maximum potential increase in EPS. So if security decreases the earnings per share ratio, it is, by definition, anti-dilutive. D. The definition of diluted earnings per share requires that diluted earnings per share reflect the worst-case scenario or maximum potential increase in EPS. So if a security…