A firm with a higher degree of operating leverage would be considered less risky than a comparable firm with a lower degree of operating leverage.

Question

Quizplus · Accepted Answer

A higher degree of operating leverage indicates that a firm has higher fixed costs and therefore a small change in sales can have a significant impact on profits. This can make the firm more vulnerable to fluctuations in demand and increases the overall risk. Thus, a comparable firm with a lower degree of operating leverage would be considered less risky.

A Firm with a Higher Degree of Operating Leverage Would