Solved: Why might ebit actually be influenced by financial leverage, Financial Accounting

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Why might ebit actually be influenced by financial leverage

Response to the following questions:

1. Why is EBIT generally considered to be independent of financial leverage? Why might EBIT actually be influenced by financial leverage at high debt levels?

2. If a firm went from zero debt to successively higher levels of debt, why would you expect its stock price to first rise, then hit a peak, and then begin to decline?

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Financial Accounting: Why might ebit actually be influenced by financial leverage

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Financial Accounting: Why might ebit actually be influenced by financial leverage

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