A high degree of operating leverage means
A) there are high labor costs.
B) there is high debt.
C) there is a large amount of equity.
D) there are high fixed costs.

Question

Quizplus · Accepted Answer

Operating leverage refers to the degree of fixed costs in a company's cost structure. When fixed costs are high, a small change in sales can have a large effect on a company's profits. This is because the fixed costs remain the same regardless of changes in sales volume. Therefore, high operating leverage means that a company has high fixed costs.

A High Degree of Operating Leverage Means