Economics · Financial Management
Consider the following statements regarding leverage: 1. Financial leverage arises due to the presence of fixed financial costs, such as interest on debt. 2. Operating leverage measures the percentage change in Earnings Per Share (EPS) for a given percentage change in EBIT. 3. Combined leverage measures the total effect of changes in sales on EPS. 4. High financial leverage inherently magnifies the financial risk of the firm. Which of the statements given above are correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 11, 2, 3 and 4
- 21, 2 and 3 only
- 31 and 4 only
- 41, 3 and 4 only✓
Correct answer
1, 3 and 4 only
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