Final answer:
When a firm employs no debt, it has a financial leverage of zero. Operating leverage and financial leverage are related concepts but not equal. Profitability is not solely determined by the use of debt.
Step-by-step explanation:
When a firm employs no debt, it has a financial leverage of zero. Financial leverage refers to the use of debt financing to increase the potential return on equity. In this case, the firm is not using any debt, so it has no financial leverage.
Operating leverage and financial leverage are related but different concepts. Operating leverage measures how sensitive a firm's profits are to changes in its sales or revenue. Financial leverage measures the extent to which a firm uses debt to finance its operations. Therefore, it is not accurate to say that the firm's operating leverage is equal to its financial leverage when it employs no debt.
Whether or not a firm is profitable is not solely determined by its use of debt. Profitability depends on various factors such as revenue, expenses, and overall business performance.