When will a firm's degree of operating leverage be at its highest level?
A) When sales is equal to zero
B) When earnings per share is equal to one
C) When fixed costs are equal to variable costs
D) When variable costs are more than sales
E) When EBIT is equal to zero

Question

Quizplus · Accepted Answer

The degree of operating leverage is highest when EBIT (Earnings Before Interest and Taxes) is zero because at this point, any change in sales will have the maximum percentage impact on EBIT.

When Will a Firm's Degree of Operating Leverage Be at Its