The percentage change in earnings before interest and taxes (EBIT) associated with a given percentage change in sales is known as the degree of _____.
A)financial leverage
B)operating leverage
C)total leverage
D)combined leverage
E)sales leverage

Question

The percentage change in earnings before interest and taxes (EBIT) associated with a given percentage change in sales is known as the degree of _____. 
A)financial leverage
B)operating leverage
C)total leverage
D)combined leverage
E)sales leverage

Quizplus · Accepted Answer

The degree of operating leverage (DOL) measures the percentage change in EBIT associated with a given percentage change in sales. It shows the sensitivity of a company's operating income to changes in sales volume.

The Percentage Change in Earnings Before Interest and Taxes (EBIT)