Firms with high operating leverage tend to have higher asset betas.

Name: Firms with high operating leverage tend to have higher asset betas.
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Question

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Firms with high operating leverage have a higher proportion of fixed costs in their cost structure, which means that a relatively small change in sales volume can result in a larger change in operating income. This increased sensitivity to changes in sales volume leads to higher risk, which is reflected in a higher asset beta.

Firms with High Operating Leverage Tend to Have Higher Asset