The
answer to the question is highlighted in red.
Explanations are highlighted in green.
6. When a firm conducts EBIT/EPS analysis to
determine the appropriate combination of debt and equity that should be used in
its capital structure, the firm should select the capital structure that
generates the ________.
a. highest
EBIT
b. highest EPS
c. lowest
EBIT
d. lowest
EPS
e. highest
sales
The capital structure that generates the highest EPS should be
selected. But, remember that maximizing EPS is not the same as maximizing the
value of the firm.
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