This quiz is a part of the CFA Level 1 reading 'Measures of Leverage'. 

Measures of Leverage

Interest payments on the debt vary with EBIT levels. 

Interest payments on the debt stay fixed, leaving less income to be distributed over less shares. 

Interest payments on the debt stay fixed, leaving more income to be distributed over less shares. 

Higher variability of EPS with debt than all equity. 

Equivalence value between levered and unlevered firms in the presence of taxes. 

A high operating leverage indicates higher fixed cost as a percentage of total cost.

Degree of operating leverage increases with increase in sales

Financial leverage does not arise from preferred stock

A firm with higher operating leverage will have lower breakeven quantity.

A firm with higher financial leverage will have higher breakeven quantity.

Operating breakeven quantity increases as variable cost increases.

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