The Degree of Leverage Concept Is Designed to Show How

question 52

Multiple Choice

The degree of leverage concept is designed to show how changes in sales affect earnings before interest and taxes (EBIT) and earnings per share (EPS) . If a 10 percent increase in sales causes EPS to increase from $1.00 to $1.50 and if the firm uses no debt, then what is its degree of operating leverage?

• A)0.5×
• B)1.5×
• C)2.0×
• D)5.0×
• E)7.5×

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Definitions:

Sexual Harassment

Unwelcome or inappropriate sexual advances, requests for sexual favors, or other verbal or physical conduct of a sexual nature.

Quid Pro Quo

A Latin term meaning an exchange of goods or services, where one transfer is contingent upon the other.

Hostile Environment

An unwelcoming or unpleasant atmosphere, especially in the workplace, which may involve harassment or discrimination.

Hedonist

A person who believes that the pursuit of pleasure or happiness is the most important goal in life.