Which of the Following Is True of the Degree of Operating

question 8

Multiple Choice

Which of the following is true of the degree of operating leverage (DOL) ?

• A) The higher the DOL, the closer the firm is to its financial breakeven point.
• B) The higher the DOL, the lower the financial risk of the firm.
• C) The lower the DOL, the higher the operating risk of the firm.
• D) The higher the DOL, the closer the firm is to its operating breakeven point.
• E) The higher the DOL, the higher the percentage increase in the sales.

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Definitions:

Terminal Value

The future value of a series of cash flows projected to grow at a steady rate indefinitely, often used in discounted cash flow analysis.

Moral Code

A set of principles or values guiding an individual's distinctions between right and wrong behaviors.

Principles

Fundamental truths or propositions that serve as the foundation for a system of belief, behavior, or reasoning.

Conduct

The manner in which a person behaves, especially in a particular context or situation, reflecting their values, ethics, and professionalism.