Which of the Following Statements Is CORRECT

question 58

Multiple Choice

Which of the following statements is CORRECT?

• A) For a given change in sales, the corresponding percentage change in net income could be more or less than the percentage change in operating income.
• B) The degree of total leverage (DTL) is equal to the DOL plus the degree of financial leverage (DFL).
• C) The degree of total leverage (DTL) is equal to the DFL divided by the degree of operating leverage (DOL).
• D) Arithmetically, financial leverage and operating leverage offset one another so as to keep the degree of total leverage constant. Therefore, the formula shows that the greater the degree of financial leverage, the smaller the degree of operating leverage.
• E) The degree of operating leverage (DOL) depends on a company's fixed costs, variable costs, and sales. The DOL formula assumes (1) that fixed costs are constant and (2) that variable costs are a constant proportion of sales.

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Definitions:

Citric Acid Cycle

A series of chemical reactions used by all aerobic organisms to release stored energy through the oxidation of acetyl-CoA derived from carbohydrates, fats, and proteins.

Acetyl-CoA Formation

A crucial metabolic process in which acetyl-CoA is produced from carbohydrates, fats, and proteins and is used in the Krebs cycle for energy production.

Electron Transfer Phosphorylation

A process in cellular respiration where electrons are transferred through a series of protein complexes, resulting in the generation of ATP.

Intermembrane Space

The region located between the inner and outer membranes of a mitochondrion or a chloroplast, involved in various cellular processes.