Mike Moser prefers alternatives that lower the degree of operating leverage. Which of the following statements about Mike is probably true?
A) Mike loves to gamble in Las Vegas.
B) Mike is a pessimist.
C) Mike likes to avoid risk.
D) Both (b) and (c) are likely to be true.

Question

Quizplus · Accepted Answer

Lowering the degree of operating leverage is a strategy that reduces a company's fixed costs relative to its variable costs, which in turn reduces the company's risk exposure to fluctuations in sales volume. This suggests that Mike prefers to avoid risk, which could be indicative of a pessimistic outlook on the unpredictability of business or market conditions. Therefore, both options B (Mike is a pessimist) and C (Mike likes to avoid risk) are likely to be true, making option D the correct answer.

Mike Moser Prefers Alternatives That Lower the Degree of Operating