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What is the Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL) and Degree of Combined Leverage (DCL)?

What is the Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL) and Degree of Combined Leverage (DCL)?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Company H wants to calculate degree of operating, financial and combined leverage for the company using 2018 financial data. The financial data are as follows: Sales (80,000 units) S800,000 Variable costs S250,000 $550,000 $150,000 Contribution Fixed costs $400,000 $50,000 Operating income Interest Earnings before taxes $350,000 What is the Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL) and Degree of Combined Leverage (DCL)? a. DOL is 1.143; DFL is 1.132 and DCL is 1.571. b. DOL is 1.571; DFL is 1.143 and DCL is 1.143. c. DOL is 1.143; DFL is 1.143 and DCL is 1.137. d. DOL is 1.375; DFL is 1.143 and DCL is 1.571.
Transcribed Image Text:Company H wants to calculate degree of operating, financial and combined leverage for the company using 2018 financial data. The financial data are as follows: Sales (80,000 units) S800,000 Variable costs S250,000 $550,000 $150,000 Contribution Fixed costs $400,000 $50,000 Operating income Interest Earnings before taxes $350,000 What is the Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL) and Degree of Combined Leverage (DCL)? a. DOL is 1.143; DFL is 1.132 and DCL is 1.571. b. DOL is 1.571; DFL is 1.143 and DCL is 1.143. c. DOL is 1.143; DFL is 1.143 and DCL is 1.137. d. DOL is 1.375; DFL is 1.143 and DCL is 1.571.
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