A company with a high level of operating leverage will:

Question

Quizplus · Accepted Answer

A company with a high level of operating leverage has a higher proportion of fixed costs in its cost structure, meaning that its operating costs are largely fixed regardless of changes in sales. As a result, when sales revenue decreases, the company's profit will decrease more significantly than a company with a lower level of operating leverage, which has a cost structure with a higher proportion of variable costs that decrease with sales volume. Conversely, when sales revenue increases, the company's profit will increase more significantly than a company with a lower level of operating leverage, making their income more volatile.

A Company with a High Level of Operating Leverage Will