A Firm That Has a 2

question 78

Multiple Choice

A firm that has a 2.5 DOL (degree of operating leverage) would find that an 8% increase in EBIT would result from a ____ increase in sales.

• A) 3.2%
• B) 5.4%
• C) 20.0%
• D) 2.0%

---

Definitions:

Expected Rate of Return

The anticipated amount of profit or loss that an investment may generate, based on historical data or statistical analysis.

Booming Economy

An economic state characterized by significant growth, increased employment, and rising consumer confidence and spending.

Recessionary Economy

An economy experiencing a significant decline in activity across the economy, lasting longer than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Stock

A form of investment that indicates one has a stake in a company and entails a portion of the company's assets and profits.