The total variability of the firm's EPS associated with a change in sales is an indication of combined leverage and is best measured by
A)DOL
B)DFL
C)DOL + DFL
D)DOL × DFL

Question

Quizplus · Accepted Answer

The question specifically asks for a measurement of the total variability of EPS associated with a change in sales, which is a combination of both operating leverage (measured by DOL) and financial leverage (measured by DFL). Therefore, the correct answer is the product of DOL and DFL, which is D.

The Total Variability of the Firm's EPS Associated with a Change