A firm has a profit margin of 5% this year and 4% last year; while the industry average is 4% this year and 5% last year suggests:

• the trend is that the firm is more profitable than the industry average.

• the trend that the profitability of the firm has improved when compared with industry average.

• the trend that the profitability of the firm has deteriorated against the industry average.

• the trend is that the firm is less profitable than industry average.

Pro forma statements are:

• financial statements both in the past and future.

• projected income statements only.

• projected financial statements.

• past financial statements.

A firm with stable cash flows operating in favorable economic conditions should:

• use more debt to maximize share values.

• focus on short-term financing.

• use less debt to maximize share values.

• focus on equity financing.

A firm's operational costs may be classified as:

• fixed and permanent.

• fixed, permanent and variable.

• fixed, variable or semi variable.

• fixed and semi-variable.

The Degree of Financial Leverage of a firm:

• can easily be determined from the balance sheet.

• does not vary with the level of operations of the firm.

• is equal to the break-even point in units.

• varies with the level of EBIT.