5. Which of the following statements is correct?

A-- All the answers are correct.

B-- A more direct method of calculating the DOL is to use the following equation is DOL = (Sales - Variable Costs)/EBIT.

C-- Because the amount of debt is determined by managerial choice, the business risk that a firm faces is also determined by management.

D-- Fixed costs are those costs that are expected to change at the same rate as the firms sales.

E-- If a firms operating costs are all variable, then any variation in sales will be less than the variation in EBIT.

6. Which of the following statements is correct?

A-- All the answers are correct.

B-- The degree of financial leverage (DFL) can be found by dividing the percentage changes in EPS by the percentage changes in EBIT.

C-- The degree of operating leverage (DOL) can be found by dividing the percentage changes in EPS by the percentage changes in EBIT.

D-- If a 10% change in sales results in a 10% change in EBIT, we would say that the degree of operating leverage (DOL) is 0.5.

E-- The more variable a firms revenues relative to its costs, the less variable its EBIT will be.