Which one of the following characteristics best describes a project that has a low degree of operating leverage?
A)high variable costs relative to the fixed costs
B)relatively high initial cash outlay
C)an OCF that is highly sensitive to the sales quantity
D)high level of forecasting risk
E)a high depreciation expense

Question

Quizplus · Accepted Answer

A low degree of operating leverage means that the fixed costs of a project are relatively low compared to the variable costs. Therefore, high variable costs relative to fixed costs (choice A) is the best characteristic to describe a project with low operating leverage.

Which One of the Following Characteristics Best Describes a Project