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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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olganol [36]

Answer: possible options:

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Explanation:

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8 0
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3 years ago
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timurjin [86]

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<h3>What is the wraparound mortgage loan?</h3>

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Read more on the wraparound mortgage loan here:

brainly.com/question/14454865

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8 0
1 year ago
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yulyashka [42]
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