Question

All else being equal, a company with a low operating leverage will have:

Answer 1

Answer:

c) relatively high variable costs

Explanation:

Operating leverage is a ratio that is used to analyze and understand the cost structure of a business. It gives the relation between the variable and fixed cost to the the total cost of running the business.

A business with a large amount of fixed cost relative to variable is said to have  a high operating leverage . For such business, operating income would  be more volatile because the operating income would not increase in commensurate proportion as sales revenue.

And a company with low operating leverage has low amount of fixed cost relative to variable cost and therefore a relatively high variable costs

Operating leverage is calculated as

Contribution /Earnings before interest  and Tax