Companies with high levels of operating leverage are less risky than companies with low levels of operating leverage.

Question

Quizplus · Accepted Answer

Companies with high levels of operating leverage are more risky than companies with low levels of operating leverage. This is because high operating leverage means a company has high fixed costs, which can amplify both profits and losses. In contrast, low operating leverage means a company has low fixed costs, which can result in more stable profits and less risk.

Companies with High Levels of Operating Leverage Are Less Risky