What happens to a firm with high operating leverage when the overall level of sales is very high?
A) The firm will have higher levels of fixed costs.
B) The firm will enjoy high profits.
C) The firm will not break even in accounting terms.
D) The firm will have a reduced level of fixed costs.

Question

Quizplus · Accepted Answer

A firm with high operating leverage will see a larger increase in profits as sales increase, given that their fixed costs remain constant. Therefore, a high level of sales will lead to higher profits for the firm.

What Happens to a Firm with High Operating Leverage When