A company with a high operating leverage will experience

Question

Quizplus · Accepted Answer

A company with a high operating leverage has a high fixed cost and low variable cost. This means that a small increase in sales will result in a large increase in operating income because the fixed cost remains the same while the revenue increases. On the other hand, a small decrease in sales will lead to a significant decrease in operating income because the fixed cost remains constant while the revenue decreases. Therefore, the company will experience a large percentage change in operating income as a result of a small percentage change in sales.

A Company with a High Operating Leverage Will Experience