Goyal Inc. has an operating leverage of 12.5. If the company's sales increase by 6%, its net operating income should increase by about:

Name: Goyal Inc. has an operating leverage of 12.5. If the company's sales increase by 6%, its net operating income should increase by about:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Operating leverage indicates how a percentage change in sales will affect profits. With an operating leverage of 12.5, a 6% increase in sales would result in a 6% * 12.5 = 75% increase in net operating income.

Goyal Inc Has an Operating Leverage of 12