Operating leverage x Financial leverage = ________
A. Combined Leverage
B. Financial Combined Leverage
C. Operating Combined Leverage
D. Fixed leverage
Answer: Option A
Solution (By Examveda Team)
The Combined Leverage (CL) is not a distinct type of leverage analysis, rather it is a product of the Operating Leverage and the Financial Leverage. The CL may be defined as the % change in EPS for a given % change in the sales level and may be calculated as follows:Combined Leverage = Operating Leverage x Financial Leverage = % Change in EPS / % Change in sales
This Question Belongs to Commerce >> Financial Management
The correct answer should be combined leverage as the solution deck suggests combined leverage = operating leverage x financial leverage, but the right answer is given as Operating combined leverage. There seems to be come contradiction.
Answer should be (A)
Combined leverage is a combination of financial leverage and operating leverage. The answer should be A. But here the answer is c.