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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Explain what is meant by the term operating leverage. What impact does increased leverage have on risk?

To determine

Define the term operating leverage. Explain the impact of an increased leverage on risk.

Explanation

Operating Leverage:

Operating leverage is an outcome of using fixed costs to obtain a higher profit percentage change as sales change.

Operating leverage can be achieved by increasing fixed cost and decreasing variable costs...

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