The control of azeotropic distillation columns

The purpose of this study is to examine whether an association exists between firms' degree of operating leverage (DOL) coefficients and their incidence of receipt of uncertainty qualifications. An experimental sample of firms that received uncertainty qualifications during 1972-1975 and in 1981 and a comparison sample of an equal number of firms that received unqualified opinions during that same time period were selected. Analysis of variance (ANOVA) was used to test for the existence of an association between firms' DOL coefficient values (as calculated from a time-series regression model) and the incidence of receipt of uncertainty qualifications.

The DOL main effect was consistently significant in all of the analyses attempted, which corroborated the hypothesis that such an association exists. In addition, those firms with DOL coefficients around a value of one were those that were the least likely to receive an uncertainty qualification. Firms with both extremely small and extremely large DOL coefficients had the highest incidence of receipt of qualifications.

Finally, an attempt was made to develop a series of DOL prediction models based on accounting ratios using the technique of multiple regression analysis. The explanatory power of the models developed was poor. A potential explanation for such poor explanatory power is that a degree of operating leverage coefficient captures certain factors and/or attributes of a firm's operating cost structure that are not impounded in traditional financial accounting ratios.