The degree of combined leverage is defined as the percentage change in earnings per share resulting from a given percentage change in ____.
A) operating costs
B) interest charges
C) common stock dividends
D) sales (or output)

Question

Quizplus · Accepted Answer

The degree of combined leverage (DCL) measures the sensitivity of EPS to changes in sales. Therefore, the correct answer is D) sales (or output). Changes in operating costs, interest charges, or common stock dividends would have a direct impact on earnings, but not necessarily on the sensitivity of EPS to changes in sales.

The Degree of Combined Leverage Is Defined as the Percentage