Common characteristics of operating and financial leverage include:

A) both involve the substitution of fixed for variable cash outflows.
B) both are affected by a firm's investing decisions.
C) both are affected by a firm's financing decisions.
D) None of the above

Operating Leverage

A financial ratio that measures the degree to which a firm can increase operating income by increasing revenue, highlighting the fixed versus variable costs structure.

Financial Leverage

The use of borrowed funds to increase the potential return on investment, amplifying both potential gains and losses.

Fixed Cash Outflows

Regular, set payments made by a business, such as rent, salary payments, and loan repayments.