Evaluate the following statement: Taxes do not enter into the equation for the degree of cash flow of operating leverage because both fixed costs and pretax operating cash flows are measured on a pretax basis.

Question

Quizplus · Accepted Answer

Since both fixed costs and pretax operating cash flows are measured on a pretax basis, taxes do not enter into the equation of operating leverage's degree of cash flow. Therefore, the statement is true.

Evaluate the Following Statement: Taxes Do Not Enter into the Equation