_________is the potential use of fixed operating costs to magnify the effects of changes in sales on earnings before interest and taxes.
A) Financial leverage
B) Total leverage
C) Operating leverage
D) Ratio analysis

Question

Quizplus · Accepted Answer

Operating leverage is the degree to which fixed costs are used in a company's operations. It can be measured by the ratio of EBIT (earnings before interest and taxes) to operating income. Therefore, EBIT is directly related to operating leverage. Financial leverage refers to the use of debt to finance a company's operations, while total leverage takes into consideration both operating and financial leverage. Ratio analysis involves the use of various financial ratios to evaluate a company's performance.

_________Is the Potential Use of Fixed Operating Costs to Magnify