Which of the following is true for a firm with high operating leverage?

Question

Quizplus · Accepted Answer

A company with high operating leverage has a high proportion of fixed costs, which means that a small change in sales can result in a large change in profits. This makes the company riskier than a company with lower operating leverage. Option A is incorrect because a high operating leverage indicates a lower proportion of mixed costs. Option C is incorrect because a company with high operating leverage has a higher contribution margin ratio at the break-even point. Option D is incorrect because if sales increase, a company with high operating leverage will experience a higher increase in profits than a company with lower operating leverage.

Which of the Following Is True for a Firm with High