In Evaluating Degree of Operating Leverage , It Is Best

question 38

Multiple Choice

In evaluating degree of operating leverage , it is best that the firm's DOL is ____.

• A) higher than 1
• B) higher than 2
• C) lower than 1
• D) equal to 1

---

Definitions:

Accounts Receivable

Represents money owed to a company by its customers for goods or services delivered but not yet paid for.

Indirect Method

A way of calculating cash flows for operational activities by starting with net income and adjusting for non-cash transactions.

Net Income

The total profit of a company after all expenses, including taxes and interest, have been deducted from revenues.

Direct Method

A method of preparing the cash flow statement where actual cash flow information from the company’s operations segment is used directly.