What Happens to a Firm with High Operating Leverage When

question 47

Multiple Choice

What happens to a firm with high operating leverage when the overall level of sales is very high?

• A) The firm is likely to have higher levels of fixed costs.
• B) The firm is likely to enjoy high profits.
• C) The firm will not break even in accounting terms.
• D) The firm will have a reduced level of depreciation.

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Definitions:

Stimulates

To encourage something to grow, develop, or become active.

Pharmacodynamic

The branch of pharmacology concerned with the effects of drugs and the mechanism of their action in the body.

Capsules

Small, typically cylindrical, dosage forms designed to encapsulate medicines for oral administration, aiding in ease of consumption and absorption.

Cylinder-Shaped

Describes an object or structure with a circular base and parallel sides, extending equally in height.