Which of the following is true of operating leverage?

Question

Quizplus · Accepted Answer

Operating leverage refers to the degree to which fixed costs are used in a company's cost structure. Companies with higher operating leverage have a higher proportion of fixed costs in their cost structure, and therefore experience higher increases in profit when sales increase. This is because as sales increase, the fixed costs are spread over a larger number of units, resulting in higher profits.

Which of the Following Is True of Operating Leverage