Top-Shelf Construction Discovered That for Every 1 Percent Decrease in Its

Multiple Choice

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.