Degree of operating leverage (DOL): It is the ratio of gross profit to net operating income. Calculate the degree of operating leverage as follows: Degree of operating leverage = Gross profit Net operating income Degree of financial leverage (DFL): It is the ratio of net operating income to earnings before tax. Calculate the degree of financial leverage as follows: Degree of financial leverage = Net operating income Earnings before tax Degree of total leverage (DTL): It is the ratio of gross profit to earnings before tax. Calculate the degree of total leverage as follows: Degree of total leverage = Gross profit Earnings before tax By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

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Answer 1

Question

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

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Answer 2

Question

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

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Answer 3

Question

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

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Answer 4

Question

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

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Answer 5

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

Answer 6

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

Answer 7

Chapter 12, Problem 10PROB

Summary Introduction

Degree of operating leverage (DOL):

It is the ratio of gross profit to net operating income.

Calculate the degree of operating leverage as follows:

Degree of operating leverage=Gross profitNet operating income

Degree of financial leverage (DFL):

It is the ratio of net operating income to earnings before tax.

Calculate the degree of financial leverage as follows:

Degree of financial leverage=Net operating incomeEarnings before tax

Degree of total leverage (DTL):

It is the ratio of gross profit to earnings before tax.

Calculate the degree of total leverage as follows:

Degree of total leverage=Gross profitEarnings before tax

By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 12 - Prob. 1PROB Ch. 12 - Prob. 2PROB Ch. 12 - Prob. 3PROB Ch. 12 - Prob. 4PROB Ch. 12 - Prob. 5PROB Ch. 12 - Prob. 6PROB Ch. 12 - Prob. 7PROB Ch. 12 - Prob. 8PROB Ch. 12 - Prob. 9PROB Ch. 12 - Prob. 10PROB

Solution Summary: The author explains the degree of operating leverage and the degrees of financial leverage.

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Chapter 12 Solutions