A Firm with High Operating Leverage Is Expected To

question 10

Multiple Choice

A firm with high operating leverage is expected to:

• A) have high variable costs.
• B) have low fixed costs.
• C) have a high degree of profitability.
• D)perform better when sales are high.

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Definitions:

Profit-maximizing

The process or strategy by which a firm determines the price and output level that returns the greatest profit.

Ethanol

A renewable fuel made from various plant materials, which can be used as an alternative to gasoline.

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

Profit

The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.