Which of the following statements about financial leverage is true?
A) Financial leverage involves the incurrence of fixed operating costs in the firm's income
stream.
B) Financial leverage is the responsiveness of the firm's EPS to fluctuations in EBIT.
C) Financial leverage reduces a firm's risk.
D) Financial leverage is the responsiveness of the firm's EBIT to fluctuations in sales.
Question 2
Spontaneous sources of funds refers to all of the below EXCEPT
A) a bank loan. B) accruals.
C) accounts payable. D) common stock.