Cleckley Corporation's operating leverage is 5.9. If the company's sales increase by 19%, its net operating income should increase by about:
A)5.9%
B)31.1%
C)19.0%
D)112.1%

Question

Quizplus · Accepted Answer

Operating leverage indicates how a percentage change in sales will affect profits. With an operating leverage of 5.9, a 19% increase in sales would result in a 19% * 5.9 = 112.1% increase in net operating income.

Cleckley Corporation's Operating Leverage Is 5