A company with high operating leverage willexperience a larg

A company with high operating leverage willexperience a larger reduction n net operating income in a period of decdining sales than a company with low operating leverage.| True or False True False B.

Solution

False.

As operating leverage increases, more sales are needed to cover the increased fixed costs. Therefore, companies with low output would not benefit from increased operating leverage.

In a company with low operating leverage the effects of fluctuations in sales volume impact profitability to a smaller degree.