Final answer:
The degree of financial leverage measures the percentage change in EPS for every 1% move in EBIT, and it is true.
Step-by-step explanation:
The statement, "The degree of financial leverage measures the percentage change in EPS for every 1% move in EBIT," is True. The degree of financial leverage (DFL) measures the sensitivity of a company's earnings per share (EPS) to changes in its earnings before interest and taxes (EBIT). It shows how much the EPS will change for a given percentage change in EBIT. For example, if a company has a DFL of 2, it means that for every 1% increase in EBIT, the EPS will increase by 2%. However, if the EBIT decreases by 1%, the EPS will decrease by 2%. The formula for calculating DFL is DFL = (EBIT / (EBIT - Interest)) * (1 - Tax Rate). By analyzing the DFL, investors and analysts can assess the financial risk and potential impact on earnings.