The higher a project's operating leverage, _____.
A) the lower the sensitivity of EBIT to changes in revenue
B) the greater the sensitivity of EBITDA to changes in revenue
C) the lower the sensitivity of net profit to changes in variable costs
D) the greater the sensitivity of net profit to changes in variable costs

Question

Quizplus · Accepted Answer

Operating leverage measures how revenue growth translates into growth in operating income (EBITDA). Higher operating leverage means a company has higher fixed costs relative to variable costs, making its EBITDA more sensitive to changes in revenue.

The Higher a Project's Operating Leverage, _____