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A company has DOL = 2 and DFL = 1.5. Combined Leverage is:
A2.0
B3.0
C2.5
D3.5
Answer & Solution
Correct answer: B. 3.0
1. Combined Leverage = DOL × DFL = 2 × 1.5.
2. Result = 3.0.
3. A 1% change in sales would change EPS by 3%.
_Source: ICAI BoS CA Inter Paper 6A, Ch 6 "Financing Decisions — Leverages", §5_
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