If the Firm's Degree of Operating Leverage Is 4

question 82

Multiple Choice

If the firm's degree of operating leverage is 4.5,what percentage change in sales will result in a 3% rise in profits?

• A) 0.33%
• B) 0.67%
• C) 3.03%
• D) 1.50%

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Definitions:

Maximum Level of Sales

The highest amount of sales a company can achieve with its current resources and capacity before needing to expand.

Debt-Equity Ratio

A metric used to evaluate the proportional use of equity and debt in the financing of company assets.

Current Level of Inventory

Represents the quantity of goods or materials on hand at a given time within a business.

Financial Plan

An in-depth analysis of a person's present and potential financial condition, utilizing existing data to forecast future earnings, the value of assets, and strategies for withdrawals.