Q219
Operating leverage examines.
A.
The effect of the change in the quantity on EBIT
AnswerB.
The effect of the change in EBIT on the EPS of the company
C.
The effect of the change in output to the EPS of the company
D.
The effect of change in EPS on the output of the company
Answer: Option A
Solution
Answer: Option A
Solution:
Operating leverage examines the effect of the change in the quantity on EBIT. Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.