The Following Chart Shows the Similarities Between Operating Leverage and Financial

question 47

True/False

The following chart shows the similarities between operating leverage and financial leverage:
$\begin{array}{|l|l|l|}\hline & \text { Operating Leverage } & \text { Financial Leverage } \\\hline \text { Risk Relationship } & \text { Amplifies present } & \text { Creates and amplifies } \\\hline & \text { business risk } & \text { financial risk } \\\hline\\\hline & \text { Substitutes fixed costs } & \text { Substitutes fixed return } \\\hline \text { Cash outflows } & \text { for variable costs in } & \text { debt for variable return } \\\hline & \text { cost structure } & \text { equity in capital structure }\\\hline\end{array}$

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Definitions:

Lava

Magma that is erupted onto the surface, or the rock mass into which it solidifies.

Uplift

The vertical elevation of the Earth's surface due to natural causes like tectonic movements.

Metamorphism

The mineralogical and structural changes of solid rock in response to changes in environmental conditions, especially at depth.

Solidification

The process in which magma cools and hardens into solid rock, with or without the formation of crystals.