Question
Select the degree of leverage that completes the following sentence. The ___________________________ is the percentage change in earnings before interest and taxes (EBIT) that results
Select the degree of leverage that completes the following sentence.
The ___________________________ is the percentage change in earnings before interest and taxes (EBIT) that results from a given percentage change in sales.
The options are DCL, DOL, or DFL
Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating:
| Praxis Corp. | Western Gas Co. | Kumatsu Motors Co. | |
|---|---|---|---|
| Degree of Operating Leverage (DOL) | 3.0 | 3.0 | 5.0 |
| Degree of Financial Leverage (DFL) | 3.0 | 2.7 | 2.1 |
According to this information, which company would be considered the riskiest?
Western Gas Co.
Kumatsu Motors Co.
Praxis Corp.
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Fundamentals of Corporate Finance
Authors: Richard Brealey, Stewart Myers, Alan Marcus
8th edition
77861620, 978-0077861629
