S1: Operating leverage measures the impact of fixed costs on operating profit. S2: Financial leverage measures the impact of fixed interest costs on earnings per share. Which statement(s) is/are correct? MCQ with Answer and Explanation

S1: Operating leverage measures the impact of fixed costs on operating profit. S2: Financial leverage measures the impact of fixed interest costs on earnings per share. Which statement(s) is/are correct?
A. Neither S1 nor S2
B. S1 only
C. Both S1 and S2
D. S2 only
Answer: Option C
Solution (By JKSSB Mock Tests)
Operating leverage arises from fixed operating costs and affects EBIT. Financial leverage arises from fixed financial charges (interest) and affects EPS. Both statements correctly define the respective leverages.

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Practice More Accountancy and Book Keeping Questions

Question #1
Which of the following is not an accounting concept?
A. Money measurement concept
B. Dual aspect concept
C. Conservatism concept
D. Dual citizenship concept

Correct Answer: Option D


Explanation:
Dual citizenship is not an accounting concept. Others are fundamental accounting concepts.

Question #2
The point at which Total Revenue equals Total Cost is known as:
A. Break-Even Point
B. Margin of Safety
C. Maximum Profit Point
D. Shut-down Point

Correct Answer: Option A


Explanation:
At the break-even point, a business makes neither a profit nor a loss (Total Revenue = Total Costs).

Question #3
Under the 'Cash Basis' of accounting, outstanding expenses are:
A. Not recorded
B. Recorded as asset
C. Recorded as liability
D. Recorded as income

Correct Answer: Option A


Explanation:
Cash basis only records cash transactions, so outstanding expenses are ignored.