Financial Management: Operational & Financial Leverage Flashcards
1
Q
Operating Leverage
A
A firm that designs its cost structure to include a higher degree of operating fixed costs than variable costs by electing to pay salaries instead of commissions, is magnifying the impact of each additional sales dollar using the concept of:
2
Q
Financial Leverage
A
Updating definition
3
Q
DOL Formula
A
% Change in EBIT/ % Change in Sales
4
Q
DFL Formula
A
% Change in EPS/ % Change in EBIT
