What happens to a firm with high operating leverage when the overall level of sales is very high?
A)the firm has higher levels of fixed costs.
B)the firm will enjoy high profits.
C)the firm will not break even in accounting terms.
D)the firm will have a reduced level of fixed costs.

Question

Quizplus · Accepted Answer

A firm with high operating leverage has a higher level of fixed costs relative to variable costs. When overall sales are very high, the fixed costs are spread over a larger revenue base, resulting in higher profits for the firm.

What Happens to a Firm with High Operating Leverage When