Corporate Finance Q110
0. Using the company’s income statement presented, its degree of operating
| Income Statement | $ millions |
| Revenues | 10.5 |
| Variable Operating Costs | 6.8 |
| Fixed Operating Costs | 2.5 |
| Operating Income | 1.2 |
| Interest | 0.4 |
| Taxable Income | 0.8 |
| Tax | 0.2 |
| Net Income | 0.6 |
- Option : A
- Explanation : DOL = (Revenues – Variable operating costs) / (Revenues – Variable operating costs –
Fixed operating costs)
= Q(P - V) / [Q(P - V) - F]
= (10.5 – 6.8) / (10.5 – 6.8 – 2.5) = 3.1.
