Operating leverage is the degree of dependence a firm places on its:
A)variable costs.
B)fixed costs.
C)sales.
D)operating cash flows.
E)net working capital.

Question

Quizplus · Accepted Answer

Operating leverage is the degree to which fixed costs are used in a company's cost structure. It measures the amount of fixed costs that a business has and how sensitive its operating income is to changes in sales. A higher degree of operating leverage means a higher proportion of fixed costs, which can magnify a company's profits or losses in response to changes in sales.

Operating Leverage Is the Degree of Dependence a Firm Places