The Degree of Combined Leverage Shows Us to What Degree

question 136

Multiple Choice

The degree of combined leverage shows us to what degree a percentage change in sales will cause a percentage change in:

• A) earnings before interest and taxes
• B) pre-tax earnings
• C) earnings per share
• D) gross profit

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Synergistic Gains

The enhanced value created by the combination of two or more companies or assets, beyond what they could achieve independently.

Acquisition

The process of obtaining control of another company or business entity through purchase or merger.

Tax Reductions

Financial strategies or government policies aimed at decreasing the amount of taxes owed by individuals or corporations.