Final answer:
The degree of operating leverage equals the contribution margin divided by the net operating income, which helps in understanding the sensitivity of net operating income to changes in sales.
Step-by-step explanation:
The degree of operating leverage (DOL) can be defined as the contribution margin divided by the net operating income, which makes option A the correct answer. The DOL provides insight into how a company's net operating income will change in response to a change in sales. A higher DOL indicates that a small percentage change in sales can lead to a larger percentage change in net operating income. Understanding the DOL is fundamental to managing and predicting the financial stability of a firm, especially when it is trying to make decisions regarding scaling up production or managing costs.