Companies that carry a high level of fixed costs relative to variable costs are considered to have greater risk than companies with a high level of variable costs relative to fixed costs.

Question

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Companies with a higher proportion of fixed costs have a higher breakeven point, which means they need to generate more revenue to cover their costs. This makes them more vulnerable in times of low demand or economic downturns. In contrast, companies with a higher proportion of variable costs can adjust their costs more easily in response to changes in demand, making them less risky.

Companies That Carry a High Level of Fixed Costs Relative