If the Degree of Accounting Leverage Is 1

question 64

Multiple Choice

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

• A) 13% increase in pretax operating cash flows.
• B) 13% increase in EBIT.
• C) 30% increase in EBIT.
• D) none of the above.

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Definitions:

Connective(s)

In logic, words or phrases that connect clauses or sentences, such as conjunctions, disjunctions, and conditionals.

Affirming

The act of validating, confirming, or asserting something as true or valid, especially within the context of logical arguments.

Modus Ponens

A form of argument in logic that if a conditional statement ("if P then Q") is accepted, and the antecedent (P) holds, then the consequent (Q) can be concluded.

Symbolic Form

expressing concepts or ideas through symbols or a symbolic language, often used in logic and mathematics to convey complex information efficiently.