A company with fixed operating costs is likely to experience:

A company with fixed operating costs is likely to experience high operating leverage. High operating leverage occurs when a company has a significant proportion of fixed costs relative to variable costs. This means that as sales increase, the fixed costs do not change, allowing for a more significant increase in operating income since the company can spread these fixed costs over a larger number of units sold.

When a company has high operating leverage, small changes in sales volume can lead to large changes in operating income. If sales decline or do not meet expectations, the impact on profitability can also be pronounced due to the high proportion of fixed costs that must be covered regardless of sales levels. Consequently, a firm with high operating leverage benefits from increased sales but faces higher risks during downturns, reinforcing the significance of its fixed operating costs in relation to overall performance.

In contrast, low operating leverage would indicate a business model that relies more on variable costs, reducing vulnerability to sales fluctuations but also limiting potential profit margins. Break-even sales refer to the point where total revenues equal total costs, which does not directly address the cost structure's impact on leverage. Market saturation describes a situation where a market is fully developed, which is unrelated to the concept of operating leverage. Therefore, high operating leverage is the most