The presence of fixed operating costs that do not change when the level of sales changes is known as _____.
A) financial leverage
B) operating leverage
C) beta risk
D) market risk
E) firm-specific risk

Question

Quizplus · Accepted Answer

The presence of fixed operating costs that do not change when the level of sales changes is known as operating leverage. It reflects the degree to which a company uses fixed costs in its operations rather than variable costs. A higher operating leverage implies a higher degree of fixed costs, which makes a company more sensitive to changes in sales revenue.

The Presence of Fixed Operating Costs That Do Not Change