The total variability of EPS associated with a change in sales is an indication of combined leverage best measured by:
A) DOL.
B) DFL.
C) DOL + DFL.
D) DOL ´ DFL.

Question

Quizplus · Accepted Answer

Combined leverage, which is the total variability of EPS associated with a change in sales, is best measured by multiplying the degree of operating leverage (DOL) and the degree of financial leverage (DFL). Therefore, the correct choice is DOL x DFL, which is option D.

The Total Variability of EPS Associated with a Change in Sales