Asked by
Ayanna Pichardo
on Dec 01, 2024
Verified
A firm's EPS increased 27% on a 12% increase in sales. At the same time its EBIT increased 8% what is the firm's DFL?
A) 1.50
B) 3.36
C) 1.34
D) 0.67
EPS
Earnings Per Share, a measure of a company's profitability, calculated as net income divided by the number of outstanding shares.
DFL
Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income due to changes in its capital structure.
EBIT
Earnings Before Interest and Taxes, a financial measure that calculates a company's profitability based on its operations without the effects of interest and taxes.
- Interpret and compute financial ratios and leverages such as EPS, DFL, and ROE.
- Determine the effects of financial leverage on a firm's financial performance.
Verified Answer
HO
Learning Objectives
- Interpret and compute financial ratios and leverages such as EPS, DFL, and ROE.
- Determine the effects of financial leverage on a firm's financial performance.