If a Firm That Has a Degree of Operating Leverage

question 6

Multiple Choice

If a firm that has a degree of operating leverage (DOL) greater than 1.0 experiences a 1.0 percent change in _____, its earnings before interest and taxes (EBIT) will change by _____1.0 percent. 

• A)earnings per share; greater than
• B)net income; greater than
• C)net operating income; less than
• D)sales; greater than
• E)fixed costs; less than

---

Definitions:

Consumer Goods

Products intended for final use by consumers rather than further manufacturing or processing.

Future Growth Rate

An estimate of how fast an economy, company, or investment is expected to grow in the future.

Division of Output

The allocation or distribution of the total goods and services produced among different sectors, markets, or consumers.

Marginal Benefits

The additional benefits received from consuming one more unit of a good or service.