1) Financial leverage deals with: 

A.-the relationship of debt and equity in the capital structure.

B.-the entire income statement.

C.-the relationship of fixed and variable costs.

D.-the entire balance sheet.

 

 

2) When a firm employs no debt 

A.-it has a financial leverage of zero.

B.-its operating leverage is equal to its financial leverage.

C.-it has a financial leverage of one.

D.-it will not be profitable.

 

 

3) A firm's break-even point will rise if 

A.-contribution margins increase

B.-price per unit rises

C.-fixed costs decrease

D.-variable cost per unit rises

 

 

4) If a firm has a price of $4.00, variable cost per unit of $2.50 and a breakeven point of 20,000 units, fixed costs are equal to: 

A.-$10,000

B.-$30,000

C.-$13,333

D.-$50,000

 

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