Which of the Following Is the Correct Interpretation of a Degree

question 40

Multiple Choice

Which of the following is the correct interpretation of a degree of operating leverage of 5?

• A) Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point.
• B) Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point.
• C) Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit.
• D) Operating leverage of 5 measures the degree of debt employed by the firm's debt structure.
• E) Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.

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Definitions:

Terminal Branch

The end portion of a nerve or blood vessel where it divides into smaller branches, reaching the target tissues or organs.

AV Bundle

The atrioventricular bundle (bundle of His) is a collection of heart muscle cells specialized for electrical conduction that transmits the electrical impulses from the AV node to the point of the apex of the fascicular branches.

Electrodes

Devices that conduct electricity and are used to make electrical contact with a part of a circuit.

Forearm

The part of the arm extending from the elbow to the wrist, comprising two bones - the radius and ulna - and associated muscles, nerves, and blood vessels.