The correct answer is: B. Operating leverage.
Operating leverage is a measure of how a firm’s operating costs change in response to changes in sales. A firm with high operating leverage has a high proportion of fixed costs in its cost structure. This means that a small change in sales can lead to a large change in operating income.
Financial leverage is a measure of how a firm’s financial costs change in response to changes in sales. A firm with high financial leverage has a high proportion of debt in its capital structure. This means that a small change in sales can lead to a large change in interest expense.
Combined leverage is a measure of how a firm’s total costs change in response to changes in sales. A firm with high combined leverage has both high operating leverage and high financial leverage. This means that a small change in sales can lead to a large change in total income.
In conclusion, operating leverage is the most important factor in determining business risk. A firm with high operating leverage is more risky than a firm with low operating leverage.