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:

Common Factors

Numbers or expressions shared as factors by two or more numbers or algebraic expressions.

Factors

Numbers or expressions that divide into another number or expression exactly, without leaving a remainder.

Nearest Hundredth

A method of rounding numbers so that they are accurate to two decimal places.

Decimal Place

A position of a number to the right of the decimal point, indicating fractions of 10.