A Firm with High Operating Leverage Has

question 21

Multiple Choice

A firm with high operating leverage has:

• A) low amounts of fixed cost in their production process.
• B) high amounts of variable cost in their production process.
• C) high amounts of fixed cost in their production process.
• D) high price per unit.
• E) low price per unit.

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Definitions:

Zero

A numerical value representing nothing or the absence of any quantity.

American Call Option

A financial contract that gives the holder the right, but not the obligation, to buy a specified asset at a certain price before the option expires.

Asset Price

The value at which an asset is bought or sold on the market.

Exercise Price

The cost at which an option holder has the right to buy or sell the base security.