_____ is a measure of the sensitivity of EBITDA or EBIT to changes in revenue.
A) Total leverage
B) Financial leverage
C) Operating leverage
D) Combined leverage

Question

Quizplus · Accepted Answer

Operating leverage measures the degree to which a company's operating income (EBITDA or EBIT) changes in response to a change in revenue. It reflects the fixed costs a company has in its operations, such as salaries, rent, and utilities, which do not vary with changes in sales volume. Therefore, a company with high operating leverage has a higher proportion of fixed costs in its operations, making its profits more sensitive to changes in revenue.

_____ Is a Measure of the Sensitivity of EBITDA or EBIT