Two firms which have the same operating leverage must also have the same ROA,since operating leverage and ROA both measure the effective utilization of assets by the firm.

Question

Quizplus · Accepted Answer

Operating leverage measures the impact of fixed costs on the firm's profitability, while ROA measures the firm's efficiency in generating profits from its assets. Two firms with the same operating leverage may have different ROAs if one of them is able to generate higher profits from its assets.

Two Firms Which Have the Same Operating Leverage Must Also