Which of the following is correct?
A)Capital structure affects both financial leverage and operating leverage.
B)Cost structure affects both financial leverage and operating leverage.
C)Capital structure affects financial leverage and cost structure affects operating leverage.
D)Capital structure affects operating leverage and cost structure affects financial leverage.
E)None of the above is correct.

Question

Quizplus · Accepted Answer

Capital structure, which includes debt and equity, influences financial leverage by affecting the proportion of debt financing. Cost structure, involving fixed and variable costs, impacts operating leverage by determining how costs behave with changes in production volume.

Which of the Following Is Correct