Which of the following methods would NOT result in a reduction of business risk?
A) increase fixed operating costs
B) diversification
C) reduce operating leverage
D) reduce sales volatility

Question

Quizplus · Accepted Answer

Increasing fixed operating costs actually increases business risk because it raises the break-even point. The higher the fixed costs, the more sales a company must generate to cover those costs, making the business more sensitive to changes in sales volume. Diversification, reducing operating leverage, and reducing sales volatility are strategies aimed at reducing business risk by spreading risk, lowering fixed costs relative to variable costs, and stabilizing revenue streams, respectively.

Which of the Following Methods Would NOT Result in a Reduction