General Studies · Leverage Analysis
Which of the following corporate scenarios most strongly indicates that a firm has high operating leverage?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A trading concern relying heavily on short-term bank overdraft facilities for working capital requirements
- 2A manufacturing plant requiring heavy investment in automated machinery, leading to high fixed depreciation costs✓
- 3A distributor holding zero debt and relying entirely on inventory turnover
- 4A service provider operating with minimal fixed assets and highly variable labor costs
Correct answer
A manufacturing plant requiring heavy investment in automated machinery, leading to high fixed depreciation costs
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