1. Which one of the following does NOT affect the business risk of a firm?

• Competition
• Debt financing
• Demand of the products
• Volatility in sales

2.If an industry tends to require a high level of fixed operating cost, then it:

• Tends to have higher DCL.
• Tends to have lower DFL.
• Tends to have higher financial risk.
• Tends to have lower operating risk.

3.What is the break-even number glasses of lemonade that need to be sold if a lemonade stand'stotal fixed costs equal $200,000 and the contribution margin per glass is $0.50?

• 100,000
• 400,000
• 125,000
• 200,000

4.Degree of Financial Leverage is a multiplier that describes the percentage change in:

• Net income associated with a percentage change in sales.
• Net income associated with a percentage change in operating income.
• Operating income associated with a percentage change in sales.
• Gross income associated with a percentage change in sales.

5.MyEducator20x5 Income Statement (in $millions)Sales5,521Cost of Goods Sold (100% variable)552Operating Expense (100% fixed)3,249Earnings Before Interest and Taxes1,720Interest Expense840Earnings Before Taxes880Taxes352Net Income528

What is the DOL of MyEducator? Assume Cost of Goods Sold is variable cost and all operating expenses are fixed costs.

• 1.32
• 6.27
• 3.21
• 2.89

6.In 20X8ABC Corporation had sales of $3,482 (in millions), EBIT of $638 (in millions), and net income of $189 (in millions). Its DOL, DFL, and DCL are 5.46, 3.38 and 18.42, respectively. If the sales decreasesto $3,300(in millions) in 20X9, what is the earnings before interest and taxes of ABC in 20X9?

• $820
• $525
• $673
• $24
• $456

7.eBuy Corporate Income StatementeBuy Corporation20x1 Income Statement (in $millions)Sales2,877Cost of Goods Sold (100% variable)1,012Operating Expense (100% fixed)821Depreciation364Earnings Before Interest and Taxes680Interest Expense320Earnings Before Taxes360Taxes140Net Income220

What is the Degree of Financing Leverage (DFL) for eBuy?

• 3.86
• 1.89
• 2.13
• 3.09

8.In 20X8ABC Corporation had sales of $3,482 (in millions), EBIT of $638 (in millions), and net income of $189 (in millions). Its DOL, DFL, and DCL are 5.46, 3.38 and 18.42, respectively. If the EBITdecreasesto $600 (in millions) in 20X9, what is the net income of ABC in 20X9?

• $199
• $227
• $151
• $128
• -$18

9.Buy Corporate Income StatementeBuy Corporation20x1 Income Statement (in $millions)Sales2,877Cost of Goods Sold (100% variable)1,012Operating Expense (100% fixed)821Depreciation364Earnings Before Interest and Taxes680Interest Expense320Earnings Before Taxes360Taxes140Net Income220

What is the degree of combined leverage for eBuy? Assume Cost of Goods Sold is variable cost and all operating expenses are fixed costs.

• 1.89
• 13.07
• 5.18
• 2.74

1. in 20X5MyEducator had sales of $5,521(in millions), EBIT of $1,720 (in millions), and net income of $528 (in millions). Its DOL, DFL, and DCL are 3.21, 3.26 and 10.46, respectively. If the sales decreases to $5,200 (in millions) in 20X6, what is the net income of MyEducator in 20X6?

• $1
• $207
• $429
• $849
• $545