The degree of combined leverage is equal to the ____ multiplied by the ____.
A) degree of operating leverage; variable cost ratio
B) degree of financial leverage; variable cost ratio
C) degree of operating leverage; degree of financial leverage
D) degree of operating leverage; fixed cost ratio

Question

Quizplus · Accepted Answer

The degree of combined leverage is calculated by multiplying the degree of operating leverage (which measures the effect of fixed operating costs on earnings) by the degree of financial leverage (which measures the effect of fixed financial costs on earnings).

The Degree of Combined Leverage Is Equal to the ____