Companies with large amounts of fixed costs will generally have a high operating leverage.

Question

Quizplus · Accepted Answer

This is because fixed costs remain constant regardless of production levels, so as production increases, the cost per unit decreases, resulting in higher profitability. However, if production decreases, the cost per unit increases, resulting in lower profitability. This means that the company's profits are more sensitive to changes in sales volume, leading to a higher operating leverage.

Companies with Large Amounts of Fixed Costs Will Generally Have