Expert Analysts Resources (EAR) Has Provided You with the Following

Expert Analysts Resources (EAR) has provided you with the following information about three companies you are currently evaluating:
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C $\begin{array} { l c c } \text { Company } & \text { Degree of Operating Leverage (DOL) } & \text { Degree of Financial Leverage (DFL) } \\\hline\text { Acme } & 1.5 \times & 6.0 \times \\\text { Apex } & 3.0 \times & 4.0 \times \\\text { Alps } & 5.0 \times & 2.0 \times\end{array}$
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Based on this information, which firm is regarded as having the greatest overall risk?

A) Acme, because it has the highest degree of financial leverage (DFL) .
B) Acme, because has the highest degree of total leverage (DTL) .
C) Apex, because it has the highest degree of total leverage (DTL) .
D) Alps, because it has the highest degree of operating leverage (DOL) .
E) Acme, because it has the lowest degree of operating leverage (DOL) .

Correct Answer:

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