A Firm Has an Operating Leverage Factor of 4

question 5

Multiple Choice

A firm has an operating leverage factor of 4. This means that

• A) if sales revenue increased by 2 per cent, profit would increase by 4 per cent.
• B) if sales revenue increased by 2 per cent, profit would increase by 8 per cent.
• C) if sales revenue increased by 2 per cent, profit would increase by 2 per cent.
• D) profit would increase by 4 times the dollar increase in sales revenue.