Holding all other factors constant, a firm that is subject to a greater level of business risk should employ more operating leverage than an otherwise equivalent firm that is subject to a lesser level of business risk.

Question

Quizplus · Accepted Answer

A firm with greater business risk should employ less operating leverage to avoid amplifying the risk through fixed costs, as operating leverage increases the volatility of earnings.

Holding All Other Factors Constant, a Firm That Is Subject