Describe how expanding the division with the highest operating leverage would affect the company's risk position.
Based on the degree of operating leverage, how will this impact the risk?
Answer with graphs is attached below in brainmass.doc file
Operating leverage is the name given to the impact on operating income of a change in the level of output. The operating leverage reflects the extent to which a change in sales affects earnings and a high operating leverage ratio, with a highly elastic product demand, will cause sharp earnings fluctuations. If the ...
Explore how expanding the division with the highest operating leverage would affect the company's risk position.