Operating leverage refers to the presence of _____.
A)fixed-income securities
B)beta risks
C)firm-specific risks
D)variable operating costs
E)fixed operating costs

Question

Operating leverage refers to the presence of _____. 
A)fixed-income securities
B)beta risks
C)firm-specific risks
D)variable operating costs
E)fixed operating costs

Quizplus · Accepted Answer

Operating leverage refers to the degree to which a company uses fixed operating costs in its operations. As such, the correct answer is E (fixed operating costs). Option A (fixed-income securities) and B (beta risks) are unrelated to operating leverage. Option C (firm-specific risks) is not necessarily related to operating costs, while option D (variable operating costs) is the opposite of fixed operating costs and therefore not related to operating leverage.

Operating Leverage Refers to the Presence of _____