[amp_mcq option1=”business risk” option2=”financial risk” option3=”both risks” option4=”production risk” correct=”option1″]<\/p>\n
The correct answer is: A. business risk<\/strong><\/p>\n Operating leverage measures the extent to which a company’s fixed costs are a part of its overall costs. A company with high operating leverage has a higher proportion of fixed costs to variable costs. This means that a small change in sales can have a large impact on the company’s profits.<\/p>\n Business risk is the risk that a company’s profits will fluctuate due to changes in the economy, industry, or company-specific factors. Business risk is higher for companies with high operating leverage because a small change in sales can have a large impact on profits.<\/p>\n Financial risk is the risk that a company will not be able to meet its financial obligations. Financial risk is higher for companies with high debt levels because debt payments are fixed costs that must be made regardless of the company’s sales.<\/p>\n Production risk is the risk that a company will not be able to produce its products at the level of demand. Production risk is higher for companies with complex production processes or that rely on a small number of suppliers.<\/p>\n In conclusion, operating leverage measures business risk, not financial risk or production risk.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”business risk” option2=”financial risk” option3=”both risks” option4=”production risk” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-49122","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n