Which of the Following Is a Correct Way to Calculate

question 21

Multiple Choice

Which of the following is a correct way to calculate degree of combined leverage?

• A) divide DFL by DOL
• B) multiply DOL by DFL
• C) divide DOL by DFL
• D) add DOL and DFL

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Definitions:

Premium on Bonds Payable

The amount by which the bond's selling price exceeds its face value, reflecting higher interest or less risk as perceived by investors.

Face Value

The nominal or dollar value printed on a bond, note, or other financial instrument, representing the amount due at maturity.

Journal Entry

A record in the books of accounts that represents a business transaction, including information about debit and credit entries.

Bonds Payable

Long-term liabilities that represent money a company owes to bondholders, to be repaid at a specified maturity date.