In financial management, if a company's Degree of Operating Leverage (DOL) is 2.5 and Degree of Financial Leverage (DFL) is 1.5, what is the Degree of Combined Leverage (DCL)? MCQ with Answer and Explanation
In financial management, if a company's Degree of Operating Leverage (DOL) is 2.5 and Degree of Financial Leverage (DFL) is 1.5, what is the Degree of Combined Leverage (DCL)?
A. 1.66
B. 3.75
C. 4.0
D. 1.0
Answer: Option B
Solution (By JKSSB Mock Tests)
DCL = DOL * DFL. Therefore, DCL = 2.5 * 1.5 = 3.75. This indicates that a 1% change in sales will result in a 3.75% change in EPS.
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