Which of the Following Statements Is True Regarding Operating Leverage

question 30

Multiple Choice

Which of the following statements is true regarding operating leverage?

• A)Companies with high operating leverage will earn lower profits than companies with low operating leverage.
• B)Companies with high operating leverage will earn higher profits than companies with low operating leverage.
• C)Companies with high operating leverage generally experience fewer profit fluctuations as sales fluctuate than do companies with low operating leverage.
• D)Companies with high operating leverage generally experience larger operating profit fluctuations as sales fluctuate than do companies with low operating leverage
• E)None of the answer choices is correct.

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Definitions:

Hierarchy

A system or organization in which people or groups are ranked one above the other according to status or authority.

Centralization

The concentration of decision-making authority at the upper levels of an organization.

Specialization

The process of focusing on and becoming expert in a specific area of knowledge or activity.

Differentiation

The process of identifying and emphasizing the unique characteristics or features of a person, product, or organization.