Question

Degree of operating leverage is used to (Pick One):

A) calculate change in sales given change in profit.

B) calculate change in profit given change in sales.

C) calculate break-even sales given change in sales.

D) calculate break-even sales given change in profit.

Which of the following statements about leverage is NOT correct (pick one)?

A) The degree of financial leverage measures the extent to which fixed costs are used to operate the business.

B) Decisions about whether to use fixed or variable costs affect a company's operating leverage.

C) Decisions about the use of debt or equity affect a company's financial leverage.

D) Measuring the degree of operating leverage is a form of measuring risk.

Answer 1