If a Firm Sees Its EPS Increase 27% on a 12

question 46

Multiple Choice

If a firm sees its EPS increase 27% on a 12% increase in sales. During the same period the firm saw its EBIT increase only 8%. What is the firm's DOL?

• A) 1.50
• B) 3.38
• C) 1.34
• D) 0.67

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Definitions:

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout.

Stock Split

An increase in a firm’s shares outstanding without any change in owner’s equity.

Retained Earnings

Profit that is not distributed to the shareholders but is kept by the company for future investment or to pay off debt.