Q20
Operating leverage x Financial leverage = ________
A.
Combined Leverage
AnswerB.
Financial Combined Leverage
C.
Operating Combined Leverage
D.
Fixed leverage
Answer: Option A
Solution
Answer: Option A
Solution:
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