Variability in earning numbers:

Question

Quizplus · Accepted Answer

Variability in earning numbers increases if a company increases its operating leverage, which refers to the proportion of fixed costs in a company's cost structure. Higher fixed costs lead to higher variability in earnings as changes in revenue have a bigger impact on profitability. Financial leverage, on the other hand, refers to the use of debt financing, and decreasing it does not necessarily affect the variability in earnings. Therefore, option A is incorrect, and options C and D are irrelevant to the question.

Variability in Earning Numbers