[amp_mcq option1=”Combined Leverage” option2=”Financial Combined Leverage” option3=”Operating Combined Leverage” option4=”Fixed leverage” correct=”option1″]<\/p>\n
The correct answer is: A. Combined Leverage<\/p>\n
Operating leverage is the relationship between a company’s fixed costs and its variable costs. A company with high operating leverage has a large proportion of fixed costs, which means that a small change in sales can lead to a large change in profits. Financial leverage is the relationship between a company’s debt and its equity. A company with high financial leverage has a large proportion of debt, which means that a small change in interest rates can lead to a large change in profits.<\/p>\n
Combined leverage is the product of operating leverage and financial leverage. It measures the total effect of a change in sales on a company’s profits. A company with high combined leverage has a large proportion of both fixed costs and debt, which means that a small change in sales can lead to a large change in profits.<\/p>\n
Option B, Financial Combined Leverage, is incorrect because it does not take into account operating leverage. Option C, Operating Combined Leverage, is incorrect because it does not take into account financial leverage. Option D, Fixed leverage, is incorrect because it is not a measure of the total effect of a change in sales on a company’s profits.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Combined Leverage” option2=”Financial Combined Leverage” option3=”Operating Combined Leverage” option4=”Fixed leverage” 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-57638","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n