{"id":51458,"date":"2024-04-15T23:25:07","date_gmt":"2024-04-15T23:25:07","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=51458"},"modified":"2024-04-15T23:25:07","modified_gmt":"2024-04-15T23:25:07","slug":"combined-leverage-can-be-used-to-measure-the-relationship-between-2","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/combined-leverage-can-be-used-to-measure-the-relationship-between-2\/","title":{"rendered":"Combined leverage can be used to measure the relationship between:"},"content":{"rendered":"<p>[amp_mcq option1=&#8221;EBIT and EPS&#8221; option2=&#8221;PAT and EPS&#8221; option3=&#8221;Sales and EPS&#8221; option4=&#8221;Sales and EBIT&#8221; correct=&#8221;option1&#8243;]<!--more--><\/p>\n<p>The correct answer is: A. EBIT and EPS.<\/p>\n<p>Combined leverage is a measure of the combined effect of operating leverage and financial leverage on earnings per share (EPS). It is calculated by multiplying operating leverage by financial leverage.<\/p>\n<p>Operating leverage is a measure of how sensitive a company&#8217;s earnings are to changes in sales. It is calculated by dividing EBIT by sales.<\/p>\n<p>Financial leverage is a measure of how sensitive a company&#8217;s earnings are to changes in its interest expense. It is calculated by dividing debt by equity.<\/p>\n<p>A high combined leverage ratio indicates that a company is highly sensitive to changes in sales and interest rates. This means that even small changes in sales or interest rates can have a large impact on the company&#8217;s EPS.<\/p>\n<p>A low combined leverage ratio indicates that a company is not very sensitive to changes in sales and interest rates. This means that even large changes in sales or interest rates will not have a large impact on the company&#8217;s EPS.<\/p>\n<p>Here is a brief explanation of each option:<\/p>\n<ul>\n<li>Option A: EBIT and EPS. EBIT is earnings before interest and taxes, and EPS is earnings per share. Combined leverage is a measure of the combined effect of operating leverage and financial leverage on EPS. Therefore, option A is the correct answer.<\/li>\n<li>Option B: PAT and EPS. PAT is profit after tax, and EPS is earnings per share. Combined leverage is not a measure of the relationship between PAT and EPS. Therefore, option B is not the correct answer.<\/li>\n<li>Option C: Sales and EPS. Sales is a measure of a company&#8217;s revenue, and EPS is earnings per share. Combined leverage is not a measure of the relationship between sales and EPS. Therefore, option C is not the correct answer.<\/li>\n<li>Option D: Sales and EBIT. Sales is a measure of a company&#8217;s revenue, and EBIT is earnings before interest and taxes. Combined leverage is a measure of the combined effect of operating leverage and financial leverage on EBIT. Therefore, option D is not the correct answer.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;EBIT and EPS&#8221; option2=&#8221;PAT and EPS&#8221; option3=&#8221;Sales and EPS&#8221; option4=&#8221;Sales and EBIT&#8221; correct=&#8221;option1&#8243;]<\/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-51458","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Combined leverage can be used to measure the relationship between:<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/combined-leverage-can-be-used-to-measure-the-relationship-between-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Combined leverage can be used to measure the relationship between:\" \/>\n<meta property=\"og:description\" content=\"[amp_mcq option1=&#8221;EBIT and EPS&#8221; 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