For Every 1 Percent Decrease in Sales of a Firm

question 56

Multiple Choice

For every 1 percent decrease in sales of a firm, the EBIT decreases by 3.2 percent. What does this statement indicate?

• A) The debt/assets ratio of the firm is 3.2 times.
• B) The degree of operating leverage of the firm is 3.2 times.
• C) The current assets of the firm are 3.2 times its current liabilities.
• D) The expenses of the firm are 3.2 percent of its income.
• E) The degree of financial leverage of the firm is 3.2 times.

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