A Company with a Degree of Operating Leverage of 4

question 132

True/False

A company with a degree of operating leverage of 4 would expect income to increase by 200% if sales increased from $100,000 to $150,000.
Increase in Sales is 50% so income increases 50%*4.

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Definitions:

Non-Common Effects

Effects of behaviour that are relatively exclusive to that behaviour rather than other behaviours.

Outcome Bias

Belief that the outcomes of a behaviour were intended by the person who chose the behaviour.

Disposition

An individual's inherent qualities of mind and character.

Naïve Scientist

A theory suggesting individuals attempt to understand the social world using logical processes akin to those used by scientists, albeit in a simplified, "naïve" manner.