If a Change in Sales Results in a Greater Relative

question 41

Multiple Choice

If a change in sales results in a greater relative change in operating income (EBIT) , we know that the firm has

• A)a degree of operating leverage greater than one.
• B)a degree of financial leverage greater than one.
• C)a degree of operating leverage less than one.
• D)a degree of financial leverage less than one.
• E)none of the above.

---

Definitions:

Bank Indebtedness

The amount of debt owed to banks by an individual or corporation, typically arising from loans or overdrafts.

Payroll Liabilities

Financial obligations related to employee compensation, including owed wages, salaries, and other benefits, which a company must pay.

CPP Contributions

Payments made into the Canada Pension Plan by workers and employers to fund future retirement, disability, or survivor benefits.

EI Premiums

Contributions made by employees and employers to the Employment Insurance (EI) program, which provides temporary financial assistance for unemployed workers.