ABC Company's net income went up 5 percent change in response to a 1 percent increase in operating profit. What is ABC Company's degree of financial leverage?
A) 0.20
B) 2
C) 5
D) 20

Question

Quizplus · Accepted Answer

The degree of financial leverage (DFL) is calculated as the percentage change in net income divided by the percentage change in operating profit, which in this case is 5% / 1% = 5.

ABC Company's Net Income Went Up 5 Percent Change in Response