Depreciation and amortization are treated like fixed costs:
A) in the calculation of the degree of pretax cash flow operating leverage.
B) in the calculation of the degree of accounting operating leverage.
C) for cash flow purposes.
D) for computing dividend.

Question

Quizplus · Accepted Answer

Depreciation and amortization are treated as fixed costs in the calculation of the degree of accounting operating leverage, which measures the percentage change in operating income due to a percentage change in sales. These depreciation and amortization expenses are not considered in the calculation of pretax cash flow operating leverage or for cash flow purposes, and they do not factor into the computation of dividends.

Depreciation and Amortization Are Treated Like Fixed Costs