Final answer:
Combined leverage is concerned with the relationship between changes in volume and changes in EBIT. It measures how sensitive a company's earnings are to changes in sales volume.
Step-by-step explanation:
Combined leverage is concerned with the relationship between changes in volume and changes in EBIT (Earnings Before Interest and Taxes). It measures how sensitive a company's earnings are to changes in sales volume.
Combined leverage can be calculated by multiplying the operating leverage (the relationship between EBIT and sales volume) with the financial leverage (the relationship between net income and EBIT).
For example, if a company has high combined leverage, a small increase in sales volume can lead to a significant increase in earnings per share (EPS), while a small decrease in sales volume can result in a larger decrease in EPS. On the other hand, a company with low combined leverage would have less sensitivity of EPS to changes in volume.