Final answer:
Combined leverage addresses how changes in sales volume affect earnings per share (EPS), which corresponds to option B. It combines operating and financial leverage, showing how sales fluctuations impact EPS through changes in operating costs and debt-related expenses.
Step-by-step explanation:
Combined leverage is a financial metric that captures how sensitive the earnings per share (EPS) are to changes in sales volume. Specifically, combined leverage relates to option B: changes in volume and changes in EPS. This metric is the product of operating leverage - which shows the relationship between changes in volume and changes in earnings before interest and taxes (EBIT) - and financial leverage - which illustrates the impact of debt on changes in EPS from changes in EBIT. Because it intertwines both operating and financial leverage, combined leverage helps firms understand how sales variability affects EPS, considering both operating costs and financial obligations.
For example, a company with high combined leverage will see a significant effect on its EPS from a relatively small change in sales volume, due to fixed costs and debt service. The opposite is true for a company with low combined leverage.