Expert Analysts Resources (EAR) Has Provided You with the Following

question 47

Multiple Choice

Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating:
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C $\begin{array} { l c c } \text { Company } & \text { Degree of Operating Leverage (DOL) } & \text { Degree of Financial Leverage (DFL) } \\\hline\text { Acme } & 1.5 \times & 6.0 \times \\\text { Apex } & 3.0 \times & 4.0 \times \\\text { Alps } & 5.0 \times & 2.0 \times\end{array}$
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Based on this information, which firm is regarded as having the greatest overall risk?

• A)Acme, because it has the highest degree of financial leverage (DFL).
• B)Acme, because has the highest degree of total leverage (DTL).
• C)Apex, because it has the highest degree of total leverage (DTL).
• D)Alps, because it has the highest degree of operating leverage (DOL).
• E)Acme, because it has the lowest degree of operating leverage (DOL).

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Definitions:

Units of X

A term often used in economics to denote a quantity of a particular good or service being considered.

Data

Information, especially facts or numbers, collected to be examined and considered and used to help decision-making.

Value for Y

This term does not directly correspond to a widely recognized economic concept without additional context. It may be used in specific mathematical or economic models to denote the value of a variable Y.

Marginal Utility

The change in total utility a person receives from consuming one additional unit of a good or service.