Sample Operating and Financial Leverage Set 1

Which of the following best defines leverage in a firm?

What is the main risk associated with high leverage?

The trade-off in leverage decisions primarily involves:

Operating leverage arises due to the presence of:

Which of the following would create higher operating leverage for a firm?

In the context of operating leverage, contribution margin is defined as:

A higher operating leverage is preferable when:

Financial leverage is primarily concerned with the use of:

Which scenario shows the negative effect of financial leverage?

Which group is typically responsible for financial leverage decisions?

Operating leverage decisions, such as technology choice, should involve:

Which statement is true?

Firms that prefer stability in income and lower risk are likely to:

In breakeven analysis under high operating leverage, a firm will:

Which best reflects the trade-off in selecting advanced technology with high fixed costs?

Which investor is more likely to prefer a highly leveraged firm?

According to financial leverage principle, borrowing benefits shareholders if:

Why do lenders allow firms to benefit more from borrowed funds?

One main constraint on a firm’s ability to borrow is:

Firms in highly cyclical industries should: