All else being equal,a company with a high operating leverage will have:

Question

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Operating leverage is the measure of how sensitive a company's earnings are to changes in revenue. A high operating leverage indicates that a company has a high proportion of fixed costs compared to variable costs. In such a scenario, when sales volume increases, the contribution margin also increases disproportionately, resulting in higher profitability. Therefore, a high operating leverage company will have a relatively high contribution margin ratio (i.e., the ratio of contribution margin to sales revenue). Option D is the only option that indicates a relatively high contribution margin ratio.

All Else Being Equal,a Company with a High Operating Leverage