Which of the Following Statements About the Degree of Operating

question 27

Multiple Choice

Which of the following statements about the degree of operating leverage (DOL) is correct?

• A)The higher the DOL, the closer the firm is to its financial breakeven point.
• B)The higher the DOL, the higher the firm's financial risk.
• C)The lower the DOL, the higher the firm's operating risk.
• 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 when fixed operating costs change.

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Definitions:

Equivalent Interest Rate

A rate that equates two or more interest arrangements by taking into account compounding periods and other terms.

Equivalent Interest Rate

An equivalent interest rate is the interest rate that equates to the compound interest over a different payment frequency, ensuring comparability among rates with different compounding periods.

Nearest 0.01%

Rounding off a number to the closest one-hundredth of a percent for precision in calculation or representation.

Nearest 0.01%

Adjusting values to ensure that they are as close as possible to an accurate hundredth of a percentage point for increased accuracy.