A firm which has a 2.5 DOL (degree of operating leverage) would find that an 8% increase in EBIT would result from a increase in sales.
A)3.2%
B)5.4%
C)20.0%
D)2.0%

Question

Quizplus · Accepted Answer

The degree of operating leverage (DOL) is a measure of how much a firm's operating income (EBIT) will change in response to a change in sales. The DOL is calculated as follows:DOL = % Change in EBIT / % Change in SalesIn this case, the firm has a DOL of 2.5, which means that a 1% increase in sales will result in a 2.5% increase in EBIT. Therefore, an 8% increase in sales will result in a 20% increase in EBIT.

A Firm Which Has a 2