If the Degree of Accounting Operating Leverage Is 1

question 10

Multiple Choice

If the degree of accounting operating leverage is 1.3 for a firm, then a 10 percent increase in revenue should drive a:

• A) 12% increase in pretax operating cash flows.
• B) 13% increase in EBIT.
• C) 30% increase in EBIT.
• D) 1.3% increase in pretax operating cash flows.

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Definitions:

Nasolacrimal Ducts

The ducts that carry tears from the lacrimal sacs of the eyes into the nasal cavity, facilitating tear drainage.

Cricoid Cartilage

Most inferior laryngeal cartilage.

Larynx

The hollow muscular organ forming an air passage to the lungs and holding the vocal cords; the voice box.

External Nares

The external openings of the nasal cavity, commonly known as nostrils, through which air enters and exits.