Unformatted text preview: 6. The degree of operating leverage - the use of fixed operating costs as opposed to other operating costs Financial Risk = The variability or uncertainty of Earnings Per Share (EPS) and the increased probability of insolvency resulting from a firm’s use of fixed, interest-bearing sources of funds (debt and preferred stock) in its capital structure. EPS = (Net Profit After Tax - Preferred Stock Cash Dividends) / # of Common Shares of Stock Outstanding...
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- Spring '08
- Finance, input costs, outputs Uncertainty