Select Page

Algebraic Approach

Algebraic Approach Mathematically, the indifference point can be obtained by using the following symbols: X = earnings before interest and taxes (EBIT) at the indifference point. N1 = number of equity shares outstanding if only equity shares are issued. N2 = number of...

Indifference Point

Indifference Point The EBI’T level at which the EPS is the same for two alternative financial plans is referred to as the indifference point/level. The indifference point may be defined as the level of EBIT beyond which the benefits of financial begin to operate...

EBIT-EPS Analysis

EBIT-EPS Analysis The EBIT-EPS analysis, as a method to study the effect of leverage, essentially involves the comparison of alternative methods of financing under various assumptions of EBIT. A firm has the choice to raise funds for financing its investment proposals...