Asked by
Verified
A firm's operating leverage is a direct function of the ratio of fixed to variable operating expenses.
Operating Leverage
A measure of how revenue growth translates into growth in operating income, indicating the percentage of fixed to variable costs a company has.
Variable Expenses
Costs that vary directly and proportionately with changes in production volume or business activity.
Fixed
Refers to an interest rate or investment that remains constant and does not fluctuate over a specified period.
- Recognize the linkage between operating leverage and financial leverage.
Verified Answer
Learning Objectives
- Recognize the linkage between operating leverage and financial leverage.
Related questions
Financial Leverage Is More Controllable Than Operating Leverage in That ...
The Following Chart Shows the Similarities Between Operating Leverage and ...
Both Operating Leverage and Financial Leverage Involve the Substitution of ...
An Increase in a Firm's Operating Leverage Will Also Increase ...
Financial Leverage Involves Substituting Debt for Equity in the Firm's ...