The "Degree of Leverage" Concept Is Designed to Show How

question 9

Multiple Choice

The "degree of leverage" concept is designed to show how changes in sales will affect EBIT and EPS.If a 10 percent increase in sales causes EPS to increase from $1.00 to $1.50, and if the firm uses no debt, then what is its degree of operating leverage?

• A)3.6
• B)4.2
• C)4.7
• D)5.0
• E)5.5

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