1. Distinguish between a firms business risk and its financial risk ?

2. Explain how operating leverage contributes to a firms business risk and conduct a breakeven analysis, complete with a breakeven chart ?

3. Define financial leverage and explain its effect on expected ROE, expected EPS, and the risk borne by stockholders ?

4. Explain what is meant by a firms optimal capital structure ?

5. List a number of factors or practical considerations firms generally consider when making capital structure decisions ?