The use of financial leverage by the firm has a potential impact on which of the following?
1. The risk associated with the firm.
2. The return experienced by the shareholder.
3. The variability of net income.
4. The degree of operating leverage.
5. The degree of financial leverage.
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A. B. C. D. E.E
Since financial leverage is the extent to which fixed-income securities are used in a firm's capital structure all of these would impact except the degree of operating leverage, which is the percentage change in EBIT that results from a given percentage change in sales.