In financial management, the 'Degree of Operating Leverage' (DOL) at a given level of sales is calculated as:
A. Contribution / EBIT
B. EBIT / Net Profit
C. Contribution / Net Profit
D. Sales / Contribution
Answer: Option A
Solution (By JKSSB Mock Tests)
The Degree of Operating Leverage (DOL) measures the sensitivity of EBIT to changes in sales. It is calculated as Contribution divided by EBIT (Earnings Before Interest and Taxes).
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