[amp_mcq option1=”EBIT to the changes in sales” option2=”EPS to the changes in EBIT” option3=”Production to the changes in sales” option4=”None of the above” correct=”option1″]<\/p>\n
The correct answer is: A. EBIT to the changes in sales.<\/p>\n
Operating leverage is a measure of how much a company’s operating income (EBIT) changes in response to a change in sales. A company with high operating leverage has a high proportion of fixed costs, so a small change in sales can lead to a large change in EBIT. A company with low operating leverage has a low proportion of fixed costs, so a small change in sales can lead to a small change in EBIT.<\/p>\n
Option B is incorrect because EPS is a measure of a company’s profitability, not its operating leverage. EPS is calculated by dividing EBIT by the number of shares outstanding.<\/p>\n
Option C is incorrect because production is a measure of a company’s output, not its operating leverage. Production is calculated by multiplying the number of units produced by the unit price.<\/p>\n
Option D is incorrect because operating leverage is a measure of a company’s operating income, not its sales, production, or EPS.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”EBIT to the changes in sales” option2=”EPS to the changes in EBIT” option3=”Production to the changes in sales” option4=”None of the above” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-47660","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n