A. Whether or not a less highly leverage firm will have higher or lower earnings per share depends on whether or not the are operating above or below the breakeven point.
B. In firms that are less highly leveraged, the company has lower fixed costs. Because fixed costs are lower, profits are more stable as the level of sales changes. This will lead to less volatile, more stable earnings per share.
C. Whether or not a more highly leverage firm will have higher or lower earnings per share depends on whether or not the are operating above or below the breakeven point.
D. The more highly leveraged a firm is, the more volatile their earnings per share will. This is because the have more fixed costs which will cause profits to fluctuate more as sales fluctuates.
