possible answer choices: 1a. % ?EBIT / % ?Sales, % ?Sales / % ?EBIT, or % ?EPS /

Question

possible answer choices:

1a. % ?EBIT / % ?Sales, % ?Sales / % ?EBIT, or % ?EPS / % ?EBIT

1b. range or specific level

2. % ?EBIT / % ?Sales, % ?EBIT / % ?EPS, or % ?EPS / % ?EBIT

3a.  % ?EBIT / % ?Sales,  % ?EPS / % ?Sales, or (S - VC)/(S - VC - F)

3b. variable or fixed

Degree of operating leverage (DOL) Formula Interpretation An index for a measures the effect of a change in sales (S) on the firm's operating income (EBIT). Alternatively, it is an indicator of the riskiness (variability) of a firm's EBIT to the use of fixed costs (F) in the firm's cost structure. range of sales that Degree of financial leverage (DFL) Formula Interpretation An index for a specific range of sales that measures the effect of a change in EBIT on a firm's earnings per share (EPS). At a constant level of sales, the DFL value will vary with a change in the amount of interest expense (I) incurred. This implies that the DFL is an indicator of a firm's risk Degree of total leverage (DTL) Formula Interpretation An index of the firm's total risk resulting from its use of operating and financial leverage. Stated differently, it is an indicator of the consequences for the firm's EPS for its use of and financing costs operating

Explanation / Answer

Degree of total leverage (DTL) = Degree of Financial Leverage (DFL) x Degree of Operating Leverage (DOL)

DTL = %EPS / %Sales; DFL = %EPS/%EBIT; DOL = %EBIT/%Sales

I am not sure which are questions are a, b or after comma. I believe that based on the formulas I shared, you would be able to select the right option.

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