1. Why does a conservative approach to operating leverage inhibit a firm’s profitability? Your answer should, at a minimum, explain the concept of operating leverage and mention the roles of contribution margin and breakeven point.
2. What types of firms or what industry sectors might it be prudent to limit operating leverage? Why?
3. Why would a firm ever issue stock or find external sources of equity if they have the opportunity to leverage with debt?
4. Explore leverage as it related to the financial crisis of 2008/2009 and share what you learned.
Put these questions into paragraphs and answer fully.