A company that has zero fixed costs will have a cash flow degree of operating leverage equal to one.

Name: A company that has zero fixed costs will have a cash flow degree of operating leverage equal to one.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) formula is: DOL = % change in operating income / % change in sales. When a company has zero fixed costs, there will be no change in operating income when there is a change in sales, so the DOL will be 1.

A Company That Has Zero Fixed Costs Will Have a Cash