If a company has high operating leverage, what would be the likely effect on its risk and return?
Question
Solution 1
High operating leverage means that a company has a high proportion of fixed costs relative to its variable costs. Here's how it would likely affect its risk and return:
- Risk: High operating leverage increases a company's risk. This is because fixed costs must be paid regardless of the company's Knowee AI is a powerful AI-powered study tool designed to help you to solve study problem.
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