UGC NET COMMERCE December 2018 Q3
0. Combined leverage can be used to measure the relationship between:
- Option : A
- Explanation : COMBINED LEVERAGE
Meaning of Combined Leverage
Combined Leverage is a measure of Total Risk. The percentage change in EPS occurring due to a given percentage change in Sales is known as the degree of combined leverage. It is the product of degree of operating leverage and degree of financial leverage.
Decision with which Combined Leverage is Associated
It is associated with Capital Budgeting Decision (or Assets Mix Decision) and Capital Structure Decision (or Capital Mix Decision). Its degree differs with the use of different forms of financing.
When Does Combined Leverage Exist?
Combined Leverage exists if there are either fixed costs or funds bearing fixed financial payments or both.
How to Calculate Combined Leverage?
Combined Leverage can be calculated with the help of following formulae:
