Your firm has a DOL of 1.25 and an EBIT of $500,000. If sales increase by 10%, calculate the percent change in EBIT.

Name: Your firm has a DOL of 1.25 and an EBIT of $500,000. If sales increase by 10%, calculate the percent change in EBIT.
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Question

Quizplus · Accepted Answer

The percent change in EBIT is calculated using the Degree of Operating Leverage (DOL) formula: Percent Change in EBIT = DOL * Percent Change in Sales. Here, it's 1.25 * 10% = 12.5%.

Your Firm Has a DOL of 1