Capital structure of ABC Ltd. consists of equity share capital ₹1,00,000 (10000 share of @ ₹10 each) and 8% debentures of ₹50,000 & earnings before interest and tax is ₹20,000. The degree of financial leverage is:

CS Executive · Financial and Strategic Management · PYQS · June 2021
Capital structure of ABC Ltd. consists of equity share capital ₹1,00,000 (10000 share of @ ₹10 each) and 8% debentures of ₹50,000 & earnings before interest and tax is ₹20,000. The degree of financial leverage is:
(A) 1
(B) 1.25
(C) 2
(D) 2.5

Answer & Explanation:

Correct Answer: Option (B)

Official answer key: (B).

Topics: Capital Structure

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