If a firm's sales decrease by 15%, and profits decrease by 20% during a recession, the firm's operating leverage is
A) 1.33.
B) 0.75.
C) 5.
D) −5.

Name: If a firm's sales decrease by 15%, and profits decrease by 20% during a recession, the firm's operating leverage is A) 1.33. B) 0.75. C) 5. D) −5.
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Question

Quizplus · Accepted Answer

Operating leverage is calculated as the percentage change in profits divided by the percentage change in sales. Here, it is -20% / -15% = 1.33.

If a Firm's Sales Decrease by 15%, and Profits Decrease