Top-Shelf Construction discovered that for every 1 percent decrease in its sales, its earnings before interest and taxes (EBIT) decrease by 3.2 percent. Based on this information, we know that Top-Shelf Construction has a:
A. debt/assets ratio equal to 3.2 times its debt/equity ratio.
B. degree of operating leverage (DOL) equal to 3.2.
C. current ratio (= Current assets/Current liabilities) equal to 3.2.
D. degree of total leverage equal to 3.2.
E. degree of financial leverage (DFL) equal to 3.2.
Answer: B
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