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Expert Analysts Resources (EAR) Has Provided You with the Following

Question 54

Multiple Choice

Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating:
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C  Company  Degree of Operating Leverage (DOL)   Degree of Financial Leverage (DFL)   Acme 1.5×6.0× Apex 3.0×4.0× Alps 5.0×2.0×\begin{array} { l c c } \text { Company } & \text { Degree of Operating Leverage (DOL) } & \text { Degree of Financial Leverage (DFL) } \\\hline\text { Acme } & 1.5 \times & 6.0 \times \\\text { Apex } & 3.0 \times & 4.0 \times \\\text { Alps } & 5.0 \times & 2.0 \times\end{array}
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Based on this information, which firm is regarded as having the greatest overall risk?


A) Acme, because it has the highest degree of financial leverage (DFL) .
B) Acme, because has the highest degree of total leverage (DTL) .
C) Apex, because it has the highest degree of total leverage (DTL) .
D) Alps, because it has the highest degree of operating leverage (DOL) .
E) Acme, because it has the lowest degree of operating leverage (DOL) .

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