A firm with a DOL of 2, and no preferred stock, and no long-term debt will have a DCL of:
A) 0
B) 2
C) 1
D) -1

Name: A firm with a DOL of 2, and no preferred stock, and no long-term debt will have a DCL of: A) 0 B) 2 C) 1 D) -1
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Quizplus · Accepted Answer

The Degree of Combined Leverage (DCL) is calculated as DOL (Degree of Operating Leverage) * DFL (Degree of Financial Leverage). Since the firm has no preferred stock and no long-term debt, its DFL is 1 (no financial leverage). Therefore, DCL = DOL * 1 = 2 * 1 = 2.

A Firm with a DOL of 2, and No Preferred