Which of the following statements about operating leverage is false? O a. All of the given answers are true. O b. Keeping all factors constant, the higher the contribution margin, the higher the operating leverage. O c. Operating leverage measures how operating income will be affected by changes in sales O d. If the degree of operating leverage higher for a company, this means that the company is more risky than anothe company with low degree of operating leverage. The degree of operating leverage is higher for companies with lower fixed costs e.

Which of the following statements about operating leverage is false? O a. All of the given answers are true. O b. Keeping all factors constant, the higher the contribution margin, the higher the operating leverage. O c. Operating leverage measures how operating income will be affected by changes in sales O d. If the degree of operating leverage higher for a company, this means that the company is more risky than anothe company with low degree of operating leverage. The degree of operating leverage is higher for companies with lower fixed costs e.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Compared to companies that have a cost structure that is mainly comprised of fixed costs, companies with a cost structure that is mainly comprised of variable costs would: O a. Be vulnerable to adverse effects of economic downturn O b. Have low operating leverage Oc. Be able to enhance their profits at a higher degree on O d. Be considered more risky
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