A firm that uses large amounts of debt financing in an industry characterized by a high degree of business risk would have ________ earnings per share fluctuations resulting from changes in levels of sales.
a. large
b. small
c. no
d. constant
2007-05-05 02:55:13 · 3 answers · asked by Anonymous in Business & Finance ➔ Other - Business & Finance
If they have a high debt load, their quarterly service on that debt (interest payments) is going to be high (and usually, fixed, due to the nature of debt payments). So, if their sales (revenue) fluctuates, their EPS (net income) will be volatile, due to the fact that, no matter what, those debt payments are ALWAYS DUE.
The correct answer is A, Large.
2007-05-05 03:05:18 · answer #1 · answered by 2007_Shelby_GT500 7 · 0⤊ 0⤋
A - large
2007-05-05 10:00:29 · answer #2 · answered by Anonymous · 1⤊ 0⤋
D constant
2007-05-05 09:59:53 · answer #3 · answered by morlock825 4 · 0⤊ 1⤋