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navik [9.2K]
3 years ago
6

If a firm utilizes debt financing, a 10% decline in earnings before interest and taxes (EBIT) will result in a decline in earnin

gs per share that is larger than 10%, and the higher the debt ratio, the larger this difference will be.
True or False?
Business
1 answer:
zysi [14]3 years ago
6 0

Answer:

True

Explanation:

It is easier to explain following an example:

EBIT 100

debt interests 25

shares outstanding 500

                            No change scenario      -10% EBIT          +10% EBIT

EBIT                              100                              90                       110

<u>interests                       (25)                             (25)                      (25)     </u>

net income                    75                               65                        85

earnings per share      0.15                            0.13                      0.17

change                           -                              -13.3%                  +13.3%

A 10% EBIT decrease will result in a 13.3% decrease in earnings per share, while a 10% EBIT increase will result in a 13.3% increase in earnings per share.

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1 year ago
On July 27, 2018, shareholders of the Walt Disney Company and 21st Century Fox agreed to a $71.3 billion purchase plan that gave
LenaWriter [7]

Answer: expanding into additional businesses that unlock possibilities for a comprehensive cost enhancement strategy.

Explanation:

The options include:

purchasing a powerful and well-known brand name that could be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profits of such businesses.

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expanding into additional businesses that unlock possibilities for a comprehensive cost enhancement strategy.

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4 0
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Zolol [24]

Answer:

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Explanation:

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The budget for making the movie The Twilight Saga: New Moon was one-fifth the budget for making Harry Potter: The Half Blood Pri
sergey [27]

Answer:

The budget for The Twilight Saga: New Moon = $50 million

Explanation:

Let the budget for Twilight Saga: New Moon = T

Let the budget for Harry Potter: The Half Blood Prince = H

We are given the following:

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Cross multiplying the equation

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