The Degree of Leverage Concept Is Designed to Show How

question 4

Multiple Choice

The degree of leverage concept is designed to show how changes in sales affect earnings before interest and taxes (EBIT) and earnings per share (EPS) . If a 10 percent increase in sales causes EPS to increase from $1.00 to $1.50 and if the firm uses no debt, then what is its degree of operating leverage?

• A) 3.6
• B) 4.2
• C) 4.7
• D) 5.0
• E) 5.5

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Definitions:

Service Delivery

The process of providing services to customers or clients in an efficient, timely, and satisfactory manner.

Theory X

Douglas McGregor’s Theory X and Theory Y framework grew from the human relations movement.

Ethnocentric Attitude

A viewpoint that one's own culture or ethnicity is more important or superior to others, often leading to biases in judgment and behavior.

Systems-Oriented View

An approach that considers the organization as a system composed of interrelated and interdependent parts, focusing on how changes in one part affect the whole.