Economics · Financial Management
Given below are two statements: one is labelled as Assertion (A) and the other is labelled as Reason (R). Assertion (A): A high operating leverage indicates that a small change in sales can produce a larger percentage change in EBIT. Reason (R): High operating leverage arises because of the presence of higher fixed operating costs in the cost structure. In the light of the above statements, choose the most appropriate answer from the options given below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both (A) and (R) are correct and (R) is the correct explanation of (A)✓
- 2Both (A) and (R) are correct but (R) is not the correct explanation of (A)
- 3(A) is correct but (R) is not correct
- 4(A) is not correct but (R) is correct
Correct answer
Both (A) and (R) are correct and (R) is the correct explanation of (A)
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