Gillette Company [G], a company that manufactures and sells consumer products, uses only debt and common stock

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Gillette Company [G], a company that manufactures and sells consumer products, uses only debt and common stock to finance the firm. The firm’s EBIT and interest expense have fluctuated during the past five years. Answer the following questions about Gillette:
a. What is the degree of financial leverage (DFL) for Gillette in each of the past five years?
b. How has the change in EBIT from year to year affected Gillette’s earnings per share in each of the past five years?
c. Choose two of Gillette’s industry peers that do not have preferred stock in their capital structures and compare these companies with Gillette in regard to their degree of financial leverage? Explain what your comparison means.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Essentials of Managerial Finance

ISBN: 978-0324422702

14th edition

Authors: Scott Besley, Eugene F. Brigham

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