Company H wants to calculate degree of operating, financial and combined leverage forthe company using 2018 financial data. The financial data are as follows:Sales (80,000 units)S800,000Variable costsS250,000$550,000$150,000ContributionFixed costs$400,000$50,000Operating incomeInterestEarnings before taxes$350,000What is the Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL)and Degree of Combined Leverage (DCL)?a. DOL is 1.143; DFL is 1.132 and DCL is 1.571.b. DOL is 1.571; DFL is 1.143 and DCL is 1.143.c. DOL is 1.143; DFL is 1.143 and DCL is 1.137.d. DOL is 1.375; DFL is 1.143 and DCL is 1.571.

Leverage means the use of certain fixed costs, where the firm levers up its profitability. It…

Answered: What is the Degree of Operating…

What is the Degree of Operating Leverage (DOL), Degree of Financial Leverage (DFL) and Degree of Combined Leverage (DCL)?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter16: Financial Planning And Control

Section: Chapter Questions

Problem 18PROB

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