Expert Analysts Resources (EAR) Has Provided You with the Following

question 36

Multiple Choice

Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating:
Company Degree of Operating Leverage (DOL) Degree of Financial Leverage (DFL)
Acme 1.5× 6.0×
Apex 3.0× 4.0×
Alps 5.0× 2.0×
_____ would be considered riskiest because _____.

• A) Acme; its DFL equals 6.0, which is the highest leverage associated with any of the three firms
• B) Acme; its degree of total leverage (DTL) is almost equal to 10×
• C) Apex; it has the highest degree of total leverage (DTL) among the three firms
• D) Alps; it has the highest DOL among the three firms
• E) Acme; it has the lowest DOL among the three firms

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Definitions:

Account

An Account typically refers to a record or arrangement by which an organization maintains its relationship with a customer or client, tracking transactions and interactions.

Non-verbal Communication

The process of conveying a message without the use of words, through gestures, facial expressions, and body language.

Special Occasion Cards

Greetings cards designed for specific events or celebrations, such as birthdays, holidays, or anniversaries, to convey messages of goodwill.

Former Customer

A person or entity that previously purchased goods or services from a business but no longer does.