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Homecare Corporation's degree of operating leverage 3. sales increase by 10% , by about how much...

Homecare Corporation's degree of operating leverage 3. sales increase by 10% , by about how much would the company's net operating income increase?
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Answer #1

Degree of operating leverage =Percentage change in EBIT / Percentage change in sales

Lets, assume

Percentage change in Sales = 100 % and Percentage change in EBIT ( net operating income) = 300%

Then the Degree of operating leverage = 300 % / 100% = 3

Sales increase by 10% , the net income also increased 30%

Degree of operating leverage =( 300 + 30%) / (100% + 10% ) = 3

Homecare Corporation's degree of operating leverage 3. sales increase by 10% , company's net operating income increase also 30%.

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