Final answer:
Statement C is not true about leverage, as combined leverage shows the impact of change in sales volume on the EPS instead of just EBIT, using the entire income statement. Thus, the answer is 'C.'
Step-by-step explanation:
The question is asking to identify which statement is not true about various types of leverage. Leverage in the context of business refers to the use of various financial instruments or borrowed capital (like debt) to increase the potential return of an investment.
The first statement, 'A. Operating leverage influences the top half of the income statement, determining EBIT.' is correct. Operating leverage refers to the extent to which a company can increase operating income by increasing revenue. It shows how a change in sales volume will affect earnings before interest and taxes (EBIT). The income statement's top half is indeed focused on operating items.
The second statement, 'B. Financial leverage deals with the bottom half of the income statement, determining EPS.' is also correct. Financial leverage measures the impact of debt on a company's earnings per share (EPS). It is concerned with financing and interest expenses, which are accounted for in the latter part of the income statement, after operating income.
The third statement, 'C. Combined leverage utilizes the entire income statement, showing the impact of change in volume on EBIT.' is not true. Combined leverage indeed takes into account the entire income statement but is meant to show the impact of change in sales volume on the EPS, not just on EBIT. Therefore, the correct answer to the question is 'C'.