The Concept of Operating Leverage Refers to Which of the Following

question 39

Multiple Choice

The concept of operating leverage refers to which of the following?

• A)Operating income changes proportionately more than revenues for any given change in activity level.
• B)Operating income changes proportionately less than revenues for any given change in activity level.
• C)Operating income changes proportionately more than income for any given change in activity level.
• D)Operating income changes proportionately less than income for any given change in activity level.

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Definitions:

Exercise Value

The value of an option if it were exercised today; for call options, it is the current price of the underlying asset minus the strike price.

Strike Price

The fixed price at which the owner of an option can purchase (call) or sell (put) the underlying asset.

Convertibles

Convertibles are financial instruments, such as bonds or preferred stock, that can be converted into a predetermined number of common stock or equity shares, offering both fixed income and potential for capital appreciation.

Strike Price

The strike price is a predetermined price at which the holder of an option can buy (call option) or sell (put option) the underlying asset until the expiration date.