All Else Being Equal, a Company with a High Operating

question 85

Multiple Choice

All else being equal, a company with a high operating leverage will have

• A) relatively low fixed costs.
• B) relatively high variable costs.
• C) a relatively low risk.
• D) a relatively high contribution margin ratio.

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Definitions:

Implicit Lease Rate

The interest rate implied in a lease agreement, factoring both the lease payments and the value of the leased asset.

Residual Value Guarantees

Assurances provided by a lessee to a lessor that the asset being leased will have a specified minimum value at the end of the lease term.

Lessees

Individuals or entities that obtain the right to use property, plant, and equipment through lease agreements.

Lessors

Individuals or entities that lease or rent an asset to a lessee, often owning the asset during the lease term.