Which of the following statements is false? As a firm increases its operating leverage for a given quantity of output, this
A) changes its operating cost structure.
B) increases its business risk.
C) increases the standard deviation of its EBIT.
D) increases the variability in earnings per share.
E) decreases its financial leverage.

Question

Quizplus · Accepted Answer

Increasing operating leverage has no effect on financial leverage, which is related to the firm's use of debt to finance its operations. All other options are true - increasing operating leverage changes cost structure, increases business risk, increases standard deviation of EBIT, and increases variability in earnings per share.

Which of the Following Statements Is False? as a Firm