Which Company Is Likely to Have High Operating Leverage

question 37

Multiple Choice

Which company is likely to have high operating leverage?

• A) A company with high fixed costs.
• B) A company with high variable costs.
• C) A company with low fixed costs.
• D) A company financed largely by debt

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Definitions:

Delivery Truck

A vehicle used by businesses primarily for transporting goods to customers or between locations.

Gain or Loss

The financial result calculated as the difference between sale proceeds and the original cost of an asset.

Fully Depreciated

An asset's book value is reduced to zero, through depreciation, over its useful life, reflecting that it has no remaining unallocated cost.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was acquired, reducing its book value.