47. If debt financing is used, which of the following is correct? a. The percent

Question

47. If debt financing is used, which of the following is correct?

a. The percentage change in net operating income is greater than a given percentage change in net income.

b. The percentage change in net operating income is equal to a given percentage change in net income.

c. The percentage change in net operating income depends on the interest rate on debt.

d. The percentage change in net operating income is less than the percentage change in net income.

e. The degree of operating leverage is greater than 1.

Explanation / Answer

The answer is option b.

If debt financing is used , then the percentage change in net operating income is equal to a given percentage change in net income.

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