The percentage change in firm (or project) operating cash flow relative to the percentage change in quantity sold is called (the):
A) Cash flow marginal profit.
B) Degree of operating leverage.
C) Gross profit.
D) Net profit.
E) Financial break-even.

Question

Quizplus · Accepted Answer

The degree of operating leverage measures the percentage change in a firm's operating cash flow relative to the percentage change in quantity sold, highlighting how earnings before interest and taxes (EBIT) are affected by changes in sales volume.

The Percentage Change in Firm (Or Project) Operating Cash Flow