If a Company Has Very Low Operating Leverage (I

question 49

Multiple Choice

If a company has very low operating leverage (i.e.,a low proportion of fixed costs in the cost structure) and no changes are expected in operations:

• A) percentage change income statement percentages can serve as the basis for projecting operating expenses.
• B) using common-size income statement percentages will overstate future projected operating expenses.
• C) using common-size income statement percentages will understate future projected operating expenses.
• D) using common-size income statement percentages can serve as a reasonable basis for projecting future operating expenses.

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