Operating Leverage Is the Responsiveness of a Firm's EBIT to Changes

question 156

True/False

Operating leverage is the responsiveness of a firm's EBIT to changes in sales revenues.

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Definitions:

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, calculated as net profit divided by the cost of the investment.

Operating Assets

Assets that are used for the day-to-day operations of a business, including cash, inventory, and property, plant, and equipment.

Minimum Required Rate

The lowest acceptable rate of return on an investment demanded by an investor, considering risk factors.

Net Operating Income

The profit generated from a company's everyday operations, excluding income from investments and extraordinary items.