Ideally, a company reaches a point where increases in operating efficiency mean that expenses as a percentage of sales revenue flatten or even decline. This is referred to as ________.
A)net profit to assets ratio
B)profitability ratio
C)net profit to equity
D)operating leverage

Question

Quizplus · Accepted Answer

The described scenario is an example of achieving operating leverage, where the company's fixed costs are spread over a greater volume of sales, resulting in lower expenses as a percentage of sales revenue. Options A, B, and C do not relate to the concept of operating efficiency and decreasing expenses.

Ideally, a Company Reaches a Point Where Increases in Operating