Which of the following mathematical expressions is used to calculate the degree of pretax cash flow operating leverage?
A) 1 + (FC / EBITDA)
B) 1 + (FC / EBIT)
C) 1 + [(FC + Depreciation and Amortization) / EBITDA]
D) 1 + [(FC + Depreciation and Amortization) / EBIT]

Question

Quizplus · Accepted Answer

The degree of pretax cash flow operating leverage is calculated using the formula 1 + (FC / EBITDA), where FC stands for fixed costs and EBITDA stands for earnings before interest, taxes, depreciation, and amortization. This formula helps in understanding how sensitive a company's pretax cash flow is to changes in its sales volume.

Which of the Following Mathematical Expressions Is Used to Calculate