Firms with higher fixed costs tend to have higher degrees of operating leverage.

Question

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Operating leverage refers to the degree to which a company's profits are affected by changes in sales volume. Firms with higher fixed costs have a larger portion of their costs that do not vary with sales volume, which means that a small increase in sales can lead to a larger increase in profits. Therefore, higher fixed costs lead to higher degrees of operating leverage.

Firms with Higher Fixed Costs Tend to Have Higher Degrees