If a Firm Has a Degree of Operating Leverage (DOL)

question 17

Multiple Choice

If a firm has a degree of operating leverage (DOL) that is greater than 1.0, then it means that a 1.0 percent change in _____ will cause a change in earnings before interest and taxes (EBIT) that is _____ 1.0 percent.

• A) earnings per share; greater than
• B) net income; greater than
• C) net operating income; less than
• D) sales; greater than
• E) fixed costs; less than

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Definitions:

Locus of Control

A psychological concept referring to the extent to which individuals believe they have control over events affecting them.

Self-determination

The process by which a person controls their own life.

High Achievers

Individuals who show a strong desire to accomplish significant tasks, mastering complex subjects or achieving high standards.

Self-determination Theory

A theory of motivation that emphasizes the role of autonomy, competence, and relatedness in fostering well-being and growth.