EBIT - EPS Break even chart for three different financing alternatives
The EPS Break even chart analyzes the relationships among three different financing alternatives as follows:
DR = Debt Ratio
C1, C2, C3 = Indifference Point
X1, X2, X3 = Financial BEP
Financial BEP
It is the level of EBIT which covers all fixed financing costs of the company. It is the level of EBIT at which EPS is zero.
Indifference Point
It is the point at which different sets of debt ratios (percentage of debt to total capital employed in the company) gives the same EPS.
The EPS Break even chart analyzes the relationships among three different financing alternatives as follows:
DR = Debt Ratio
C1, C2, C3 = Indifference Point
X1, X2, X3 = Financial BEP
[Post Image Courtesy of Stuart Miles at FreeDigitalPhotos.net]
Financial BEP
It is the level of EBIT which covers all fixed financing costs of the company. It is the level of EBIT at which EPS is zero.
Indifference Point
It is the point at which different sets of debt ratios (percentage of debt to total capital employed in the company) gives the same EPS.
EBIT - EPS Break even chart for three different financing alternatives
![EBIT - EPS Break even chart for three different financing alternatives]()
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