Questions from Financial Management


Q: “One type of leverage affects both EBIT and EPS. The

“One type of leverage affects both EBIT and EPS. The other type affects only EPS.” Explain this statement.

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Q: Why is the following statement true? “Other things being the

Why is the following statement true? “Other things being the same, firms with relatively stable sales are able to carry relatively high debt ratios.”

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Q: Why do public utility companies usually have capital structures that are different

Why do public utility companies usually have capital structures that are different from those of retail firms?

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Q: Why is EBIT generally considered to be independent of financial leverage?

Why is EBIT generally considered to be independent of financial leverage? Why might EBIT be influenced by financial leverage at high debt levels?

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Q: If a firm went from zero debt to successively higher levels of

If a firm went from zero debt to successively higher levels of debt, why would you expect its stock price to first rise, then hit a peak, and then begin to decline?

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Q: Hatfield Medical Supplies’ stock price had been lagging its industry averages,

Hatfield Medical Supplies’ stock price had been lagging its industry averages, so its board of directors brought in a new CEO, Jaiden Lee. Lee had brought in Ashley Novak, a finance...

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Q: Suppose you decide (as did Steve Jobs and Mark Zuckerberg)

Suppose you decide (as did Steve Jobs and Mark Zuckerberg) to start a company. Your product is a software platform that integrates a wide range of media devices, including laptop computers, desktop co...

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Q: During the last few years, Harry Davis Industries has been too

During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the co...

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Q: You have just graduated from the MBA program of a large university

You have just graduated from the MBA program of a large university, and one of your favorite courses was “Today’s Entrepreneurs.” In fact, you enj...

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Q: Shrieves Casting Company is considering adding a new line to its product

Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The production line wou...

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