Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

Question

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Companies with a greater proportion of fixed costs have a higher break-even point, which means they need to generate a higher level of sales to cover their fixed costs and begin earning a profit. In case of a decrease in sales or revenue, the company may face a loss as it still has to pay the fixed costs. In contrast, companies with a greater proportion of variable costs can adjust their costs according to the level of sales and revenue, reducing the risk of losses in case of a decrease in sales.

Companies with a Greater Proportion of Fixed Costs Have a Greater