The degree of operating leverage and margin of safety are reciprocals.

Name: The degree of operating leverage and margin of safety are reciprocals.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) measures the sensitivity of operating income to changes in sales revenue. The margin of safety (MOS) measures the amount by which sales revenue can decline before the company incurs a loss. The DOL and MOS are reciprocals because the DOL is equal to the MOS divided by the contribution margin.

The Degree of Operating Leverage and Margin of Safety Are