[amp_mcq option1=”EBIT \u00c3\u00b7 Contribution” option2=”EBIT \u00c3\u00b7 PBT” option3=”EBIT \u00c3\u00b7 Sales” option4=”EBIT \u00c3\u00b7 Variable Cost” correct=”option1″]<\/p>\n
The correct answer is: A. EBIT \u00c3\u00b7 Contribution<\/p>\n
Financial leverage is a measure of how much a company uses debt to finance its assets. A high degree of financial leverage means that a company has a lot of debt, and a low degree of financial leverage means that a company has very little debt.<\/p>\n
The formula for calculating financial leverage is:<\/p>\n
Financial leverage = EBIT \u00c3\u00b7 Contribution<\/p>\n
Where:<\/p>\n
Financial leverage is a useful tool for companies that are trying to grow their business. By using debt to finance their assets, companies can increase their return on equity (ROE). However, financial leverage also increases a company’s risk. If a company’s sales decline, it may not be able to make its interest payments, which could lead to bankruptcy.<\/p>\n
Therefore, companies need to carefully consider their financial leverage before taking on debt. They need to make sure that they can afford the interest payments and that they have a plan in place for what they will do if their sales decline.<\/p>\n
Here is a brief explanation of each option:<\/p>\n
[amp_mcq option1=”EBIT \u00c3\u00b7 Contribution” option2=”EBIT \u00c3\u00b7 PBT” option3=”EBIT \u00c3\u00b7 Sales” option4=”EBIT \u00c3\u00b7 Variable Cost” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-46602","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n