If a Firm's Accounting Degree of Operating Leverage Is 1

question 69

True/False

If a firm's accounting degree of operating leverage is 1.12, then a 10 percent increase in revenue should result in a 12 percent increase in EBIT.

---

Definitions:

Depreciable Cost

The cost of an asset that is subject to depreciation over its useful life, excluding any salvage value.

Double-Declining-Balance Rate

A method of accelerated depreciation where an asset's book value is reduced at double the rate of its straight-line depreciation each year.

Double-Declining-Balance Depreciation

A method of accelerated depreciation that applies twice the normal depreciation rate on the declining balance of an asset.

Straight-Line Depreciation

A technique for spreading the expense of a physical asset evenly across its lifespan.