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  3. interest expense creates magnification of earnings

Interest expense creates magnification of earnings through financial leverage because: (Points : 3) Distributions to...

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Accounting

Interest expense creates magnification of earnings through financial leverage because: (Points : 3) Distributions to shareholders are tax deductible The interest rate is variable Interest accompanies debt financing While earnings available to pay interest expense rise, earnings to residual owners rise faster because interest is a fixed charge The use of interest causes higher earnings

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