At a base sales level of $400,000, a firm has a degree of operating leverage of

ID: 2707731 • Letter: A

Question

At a base sales level of $400,000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. The firm's degree of total leverage is ________. Answer
           1.3
           3.0
           3.5
           0.5 At a base sales level of $400,000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. The firm's degree of total leverage is ________. At a base sales level of $400,000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. The firm's degree of total leverage is ________. 1.3 3.0 3.5 0.5
           1.3
           3.0
           3.5
           0.5

Explanation / Answer

GIVEN:-

OPERATING LEVERAGE = 2

FINANCIAL LEVERAGE = 1.5

THERFORE,

Combined leverage factor = Operating leverage * Financial leverage

=2*1.5

THEREFORE THE ANSWER IS OPTION-B:- 3

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At a base sales level of $400,000, a firm has a degree of operating leverage of

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