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The Degree of Operating Leverage (DOL) is an important financial metric that measures the sensitivity of a company's operating income to changes in sales volume. Specifically, it quantifies how a percentage change in sales will affect the percentage change in operating profit. A higher degree of operating leverage indicates that a small change in sales can lead to a larger change in profit, reflecting the influence of fixed costs in a business's cost structure.

In situations where a company has high fixed costs relative to variable costs, the DOL can be significantly high. This means that as sales increase, the operating income increases at a greater rate because the fixed costs do not change with production levels, allowing more revenue to contribute to profit after covering fixed costs.

This concept is crucial for management when making decisions about pricing, production levels, and assessing risk. Understanding how sensitive profits are to sales fluctuations can help managers strategize accordingly.

The other options do not accurately define what the Degree of Operating Leverage measures. Proportion of fixed costs to total costs is more of a static analysis of cost behavior rather than a measure of the impact of sales changes on profit. The effect of inventory levels on sales relates to supply chain and inventory management rather than the leverage concept. Lastly, while there is