If a Firm Has Current Earnings Per Share of $2

question 39

Multiple Choice

If a firm has current earnings per share of $2 and a degree of operating leverage of 4, a 10% increase in sales would result in earnings per share of:

• A) $2.80
• B) $8
• C) $2.20
• D) cannot tell from this information

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Definitions:

Accurate

The degree to which the result of a measurement, calculation, or specification conforms to the correct value or a standard.

Cent

A Cent is a monetary unit that represents one hundredth of the base unit of currency in many countries, such as the United States dollar, Euro, and others.

Decimal Equivalent

A fraction or percentage expressed as a decimal number.

Percent Equivalent

A way to express a part of the whole number as a percentage.