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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