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:

Market Price

The current monetary value assigned to buying or selling assets or services in a marketplace.

Rights Offering

A type of financial offering in which a company gives its existing shareholders the right to buy additional shares at a discounted price before the public.

Subscription Price

The cost for purchasing a subscription to a service or product, typically charged on a recurring basis.

Ownership Position

A stake or interest that a person or entity holds in a company, typically through the ownership of shares.