Asked by
Debbie Donnelly
on Dec 01, 2024
Verified
Last year Avator's operating income (EBIT) increased by 22 percent while its dollar sales increased by 15%. What is Avator's degree of operating leverage (DOL) ?
A) .68
B) 2.0
C) 1.47
D) .32
Operating Leverage (DOL)
A measure of how revenue growth translates into growth in operating income, emphasizing the impact of fixed costs.
Operating Income (EBIT)
Earnings Before Interest and Taxes, a measure of a company's profitability from its operations.
Dollar Sales
The total revenue generated from the sale of goods or services, measured in dollars.
- Gain insights into the concept of operating leverage and its effect on a corporation's earnings before interest and taxes (EBIT).
- Assess the impact of sales variations on operating income using the concept of operating leverage.
Verified Answer
PM
Learning Objectives
- Gain insights into the concept of operating leverage and its effect on a corporation's earnings before interest and taxes (EBIT).
- Assess the impact of sales variations on operating income using the concept of operating leverage.
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