[amp_mcq option1=”EBIT” option2=”Interest liability” option3=”Equity dividend” option4=”Tax liability” correct=”option1″]<\/p>\n
The correct answer is A. EBIT.<\/p>\n
Financial break-even is the level of sales at which a company’s operating income (EBIT) is equal to its interest expense. This means that the company is not making any profit, but it is also not losing any money.<\/p>\n
If a firm has no preference share capital, then its only sources of financing are debt and equity. The interest expense on debt is a fixed cost, while the dividend on equity is a variable cost. This means that the financial break-even point is the point at which the company’s EBIT is equal to its interest expense.<\/p>\n
Option B, interest liability, is incorrect because it is not a measure of the company’s profitability. Interest liability is simply the amount of interest that the company owes on its debt.<\/p>\n
Option C, equity dividend, is incorrect because it is not a measure of the company’s profitability. Equity dividend is the amount of money that the company pays out to its shareholders in the form of dividends.<\/p>\n
Option D, tax liability, is incorrect because it is not a measure of the company’s profitability. Tax liability is the amount of money that the company owes in taxes.<\/p>\n","protected":false},"excerpt":{"rendered":"
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