Evaluate the following statement: A firm that has zero fixed costs will have a degree of cash flow operating leverage equal to one.

Question

Quizplus · Accepted Answer

A firm with zero fixed costs will have its cash flow operating leverage equal to one because operating leverage is a measure of how revenue growth translates into growth in operating income, and without fixed costs, any change in sales directly changes operating income at the same rate.

Evaluate the Following Statement: a Firm That Has Zero Fixed