Question: Why does a conservative approach to operating leverage inhibit a firm's profitability? Explain the concept of operating leverage and mention the roles of contribution margin

Why does a conservative approach to operating leverage inhibit a firm's profitability? Explain the concept of operating leverage and mention the roles of and breakeven point. What types of firms or what industry sectors might it are prudent to limit operating leverage? Why? Why would a firm ever issue stock or find external sources of equity if they have the opportunity to leverage with debt? Explore leverage as it related to the financial crisis of 2008/2009.

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Operating leverage Operating leverage refers to the measurement of the extent or degree by which a project or firm incurs the combination of both variable and fixed costs A business which has a high n... View full answer

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