Considering “Indifference analysis”, which indicates the level of operating income (or earnings before interest and tax, EBIT) where EPS (earnings per share) are equal whether the firm uses debt or equity, we can conclude that the following holds:1 pointBeyond the indifference point, more debt will maximize EPSBeyond the indifference point, more equity will maximize EPSUsing more debt makes EPS more volatileUsing more equity makes EPS more volatileBoth a) and c) are true

Which of the following statements are true regarding the effect of financial leverage and the firm's operating earnings (EBI)?Multiple select question.Financial leverage increases the slope of the EPS line.The rate of return on assets is unaffected by leverage.Below the indifference or break-even point in EBIT, an unlevered capital structure is best.Above the indifference or break-even point in EBIT, the increase in EPS for all equity structures is greater than leveraged structures.

Which of the following statements is NOT TRUE?Debt is costlier than equity.For the same business the firm can choose between the use of debt capital versus equity capital.Net profit can be substantially higher if debt is usedAll of the above

Financial leverage affects the performance of a firm because the range of possible values for Blank______.Multiple choice question.earnings per share is smalleroperating income is widerearnings per share is wideroperating income is smaller

If Additional financial leverage is always accompanied byadditional financial risk, then if the operating income that is expected toincrease actually decreases, shareholder experience a _______ of earnings pershare (EPS) and the rate of return becomes ______. Fill in the blanks.1 pointmagnification; volatilemagnification; steadydemagnification; steadydemagnification; volatile

When is a high debt to equity ratio be positive for a company's financial health and share price?1 pointIf the earnings growth that the borrowed money generates is HIGHER than the cost of borrowing itIf the earnings growth that the borrowed money generates is LOWER than the cost of borrowing itIf the company does not borrow any money