Operating leverage ____ as the volatility of operating earnings ____.
A) increases, increases
B) decreases, increases
C) increases, decreases
D) remains the same, increases

Question

Quizplus · Accepted Answer

Operating leverage increases as the volatility of operating earnings increases because operating leverage is a measure of how revenue growth translates into growth in operating income, and higher volatility in operating earnings implies a higher sensitivity of operating income to changes in revenue, indicating higher operating leverage.

Operating Leverage ____ as the Volatility of Operating Earnings ____

Operating Leverage as the Volatility of Operating Earnings