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Operating leverage

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Which of the following statements is false? As a firm increases its operating leverage for a given quantity of output, this

A. changes its operating cost structure.
B. increases its business risk.
C. increases the standard deviation of its EBIT.
D. increases the variability in earnings per share.
E. decreases its financial leverage.

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Solution Summary

The solution explains the impact of an increase in operating leverage.

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Change in operating leverage has no impact on the financial leverage of the firm. Operating leverage relates to variable and ...

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