Operating leverage primarily affects the left-hand side of the balance sheet, while financial leverage affects the right-hand side of the balance sheet.

Question

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Operating leverage is related to the cost structure of a company's operations, which affects assets and expenses on the left-hand side of the balance sheet. Financial leverage involves the use of debt, impacting liabilities and equity on the right-hand side.

Operating Leverage Primarily Affects the Left-Hand Side of the Balance