What does a degree of financial leverage (DFL) of 2.0 indicate?
A. For every 1 percent change in its sales, the firm's EBIT will change by 2 percent.
B. For every 1 percent change in its EPS, the firm's sales will change by 0.5 percent.
C. For every 1 percent change in its EBIT, the firm's EPS will change by 2 percent.
D. For every 1 percent change in its EPS, the firm's EBIT will change by 0.5 percent.
E. For every 1 percent change in its EBIT, the firm's sales will change by 2 percent.
Answer: C
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