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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios1 Mark
Question
Formula for calculating Financial Leverage is _____________.
  1. EBIT ÷ Contribution
  2. EBIT ÷ EBT
  3. EBIT ÷ Sales
  4. EBIT ÷ Variable Cost
✓

Answer

  1. EBIT ÷ EBT
Explanation:

Financial leverage depicts the amount of the debt used to acquire additional assets. It is the proportion of debt present in the total Capital Structure. The formula for Financial leverage is EBIT/ EBT.

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