Assume LK Metals is similar to its industry with one exception; it has low fixed costs relative to all other firms in that industry.Given this,you should expect LK Metals to have:

Question

Quizplus · Accepted Answer

LK Metals having low fixed costs means that its operating leverage is low. Operating leverage measures the extent to which a firm uses fixed operating costs vs variable costs. As a result, LK Metals' earnings and thus stock prices should not vary as much as the rest of the industry's. This should result in a lower beta compared to the industry's average beta.

Assume LK Metals Is Similar to Its Industry with One