... debt-financed assets, so leverage will depress income • As debt increases, TIE decreases because EBIT is unaffected by debt, but interest expense increases (Int Exp = rdD) 14-15 © 2013 Cengage ... personal tax rate? Increase in bankruptcy costs? Management spending lots of money on lavish perks? Financial flexibility? Firm’s growth rate? 14-38 © 2013 Cengage Learning All Rights Reserved May not ... fixed, hence not decline when demand falls, then the firm has high operating leverage 14-4 © 2013 Cengage Learning All Rights Reserved May not be scanned, copied, or duplicated, or posted to...