A decrease in contractual managers' salaries will result in:
A) an increase in the degree of financial leverage
B) a decrease in the degree of financial leverage
C) no change in the degree of financial leverage
D) an increase in operational leverage

Question

Quizplus · Accepted Answer

The degree of financial leverage is determined by the use of fixed financial costs, not by managerial salaries, which are operational costs. Therefore, changes in managerial salaries do not affect financial leverage.

A Decrease in Contractual Managers' Salaries Will Result In