Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 20

Comparison of operating leverage and financial leverage The concept of financial leverage was introduced in Chapter 7 and expanded on in Chapter 11. In Exercise 7.20 you were asked to describe the risks associated with financial leverage.
Required:
a. Describe the risks associated with operating leverage.
b. Outline the similarities and differences between operating leverage and financial leverage. (Hint: Compare Exhibit 12-9 to the discussion and analysis in Exhibits 7-2 and 11-3.)