Calculate Firm A's Degree of Operating Leverage

question 35

Multiple Choice

Calculate firm A's degree of operating leverage.

• A)11.0
• B)2.86
• C)9.09
• D)1.00
• E)none of the above.

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Definitions:

Cash Dividends

Payments made by a company out of its earnings to its shareholders, typically in the form of cash, representing a portion of the company's profits.

Retention Ratio

The percentage of net income that is retained in the business rather than paid out as dividends; synonymous with Plowback Ratio.

Cash Dividends

Cash dividends refer to the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.

Selling and Administrative Expenses

Costs associated with the daily operations of a business that are not directly linked to producing the product or service but are necessary for selling and managing the business.