Firms with high operating leverage tend to have:
A) High asset turnover and high return on sales.
B) Low asset turnover and low return on sales.
C) Low asset turnover and high return on sales.
D) High asset turnover and low return on sales.
E) Decreased levels of short-term fixed costs.

Question

Quizplus · Accepted Answer

Firms with high operating leverage have high fixed costs, which means they have low asset turnover (since fixed costs are not tied to sales volume) and high return on sales (since more revenue is left over to cover variable costs and contribute to profits).

Firms with High Operating Leverage Tend to Have