A firm's degree of financial leverage is 2 and the degree of operating leverage is 2.5. What is their degree of total leverage?
A)6.0
B)4.5
C)5.0
D)None of the above

Name: A firm's degree of financial leverage is 2 and the degree of operating leverage is 2.5. What is their degree of total leverage? A)6.0 B)4.5 C)5.0 D)None of the above
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Question

Quizplus · Accepted Answer

The formula for the degree of total leverage is DTL = DOL * DFL. 
DTL = 2.5 * 2 = 5.0. Thus, the answer is C.

A Firm's Degree of Financial Leverage Is 2 and the Degree