The "Degree of Leverage" Concept Is Designed to Show How

question 9

Multiple Choice

The "degree of leverage" concept is designed to show how changes in sales will affect EBIT and EPS.If a 10 percent increase in sales causes EPS to increase from $1.00 to $1.50, and if the firm uses no debt, then what is its degree of operating leverage?

• A)3.6
• B)4.2
• C)4.7
• D)5.0
• E)5.5

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Definitions:

Markup Percentage

A markup percentage is the amount added to the cost price of goods to cover overhead and profit.

Break Even

Break-even is the point at which total cost and total revenue are equal, meaning there is no net loss or gain, and it's a critical measure of financial feasibility for businesses.

Contact Efficiency

The effectiveness of a business's or marketer's interactions with potential and existing customers, focusing on optimizing time and resources to achieve desired outcomes.

Marketing Channels

The pathways or routes through which goods and services flow from the producer to the consumer, including both physical and digital means.