If the Degree of Operating Leverage Is 1

question 187

True/False

If the degree of operating leverage is 1.3 and the degree of financial leverage is 1.7, the degree of total leverage is 3.0.

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Definitions:

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the financial statements, representing liabilities.

Accrued Revenues

Accrued revenues are earnings recorded in the financial statements for goods delivered or services provided, although no cash has been received yet.

Prepaid Items

Prepaid items refer to expenses paid in advance for goods or services to be received in the future.

Adjusting Entries

These are journal entries made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.