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Vannesa Quijada
on Dec 01, 2024

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A decrease in the level of a firm's interest expense (holding all other factors constant) would:

A) increase operating leverage.
B) decrease operating leverage.
C) decrease financial leverage.
D) have no impact on operating leverage.
E) c and d

Financial Leverage

Utilizing borrowed capital to amplify the possible returns on an investment.

Operating Leverage

An indicator of the degree to which sales growth affects operational profit, showing the ratio of a company's fixed costs compared to its variable costs.

Interest Expense

The cost incurred by an entity for borrowed funds, often reported on the income statement.

  • Understand the effect of financial leverage on a firm's interest expense and operating leverage.
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HA
Henry AugustianoDec 05, 2024
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