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Degree of combined leverage considers the impact of a change in volume on the change in operating income.

A True
B False"

User Jir
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1 Answer

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Final answer:

The degree of combined leverage is indeed true to show how a change in sales volume affects a firm's earnings before interest and taxes and net income, considering cost structure and financing decisions.

Step-by-step explanation:

The statement, 'Degree of combined leverage considers the impact of a change in volume on the change in operating income', is true. The degree of combined leverage (DCL) is a financial metric that indicates how a change in sales volume will affect a firm's earnings before interest and taxes (EBIT) and net income.

It combines the effects of operating leverage, which shows the impact on EBIT due to a change in volume, and financial leverage, which shows how changes in EBIT affect the net income. This metric is crucial for analyzing the sensitivity of a company's earnings to changes in sales volumes, considering both cost structure and financing decisions.

User GAMITG
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