Calculating operating leverage. Potter Company has a degree of cash flow operating leverage equal to 1.266. If the company's EBITDA was $1,500 last year while its depreciation and amortisation expense was $100 in the same year, then what was the company's degree of accounting operating leverage?
A) 1.29
B) 1.33
C) 1.36
D) 1.39

Question

Quizplus · Accepted Answer

The degree of accounting operating leverage is calculated as (EBIT + Depreciation and amortization expense) / EBIT. In this case, the degree of accounting operating leverage is ($1,500 + $100) / $1,500 = 1.36.

Calculating Operating Leverage