Which of the following statements is correct? a. The degree of operating leverag

Question

Which of the following statements is correct? a. The degree of operating leverage (DOL) depends on a company's fixed costs, variable costs, and sales. The DOL formula assumes (1) that fixed costs are constant and (2) that variable costs are a constant proportion of sales. b. The degree of total leverage (DTL) is equal to the DOL plus the degree of financial leverage (DFL). c. Arithmetically, financial leverage and operating leverage offset one another so as to keep the degree of total leverage constant. d. The above statements are all true. e. The above statements are all false.

Explanation / Answer

its definitely option B ie b. The degree of total leverage (DTL) is equal to the DOL plus the degree of financial leverage (DFL).

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