________ leverage is concerned with the relationship between sales revenues and earnings before interest and taxes.
A) Financial
B) Operating
C) Variable
D) Total

Question

Quizplus · Accepted Answer

Operating leverage refers to the relationship between sales revenues and earnings before interest and taxes (EBIT). It focuses on how changes in sales will impact EBIT, without factoring in any interest expenses. Financial leverage, on the other hand, considers the impact of interest expenses on the earnings of the company, while total leverage considers the combined effect of both operating and financial leverage. Variable leverage is not a commonly used term in finance.

________ Leverage Is Concerned with the Relationship Between Sales Revenues