Explanation:
DFL measures the sensitivity of EPS to changes in EBIT. If only debt is present, DFL = EBIT / (EBIT - I). If preference shares are also present, the formula includes the pre-tax equivalent of preference dividends, making D option correct.
Consider these journal entries: 1. Drawings A/c Dr., To Purchases A/c 2. Machinery A/c Dr., To Cash A/c 3. Rent A/c Dr., To Outstanding Rent A/c 4. Bank A/c Dr., To Interest Received A/c. Which combination represents a compound journal entry?
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