Q64
Operating leverage = ______.
A.
contribution / EBIT
AnswerB.
contribution / EBT
C.
contribution / total expenses
D.
contribution / operating PBT
Answer: Option A
Solution
Answer: Option A
Solution:
Operating leverage = contribution / EBIT. A firm's operating leverage is defined as the percentage change in the firm's operating earnings (EBIT less any non-operating income), that accompanies a percentage change in the contribution margin. That is, the operating income elasticity with respect to the contribution margin.