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Question:
The degree of financial leverage (DFL) is the percent change in earnings per share for a given percent change in operating income. The degree of operating leverage (DOL) is the percent change in operating income for a given percent change in sales. The degree of total leverage (DTL) is the percent change in earnings per share for a given percent change in sales, and is the product of DOL and DFL. Based on the information given, Smith has a higher DFL than Jones, but we cannot conclude that Smith has a higher DTL than Jones.
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