Question

Is it possible for a firm to have a high degree of operating leverage and a low level of business risk?

Answer 1

The level of business risk relates of a company or a firm is related to the variability of operating income to change in sales. Even if a firm has high degree of operating leverage ie high proportion of fixed costs in the cost structure, the firm could have stable level of operating income , if sales quantities, prices and variable costs of marketing and production remain stable over the same period. So it is possible to have low business risk even with high operating leverage.