Using Leverage to Augment Profits-What does the Contribution Margin have to do with Operating Leverage?

Using Leverage to Augment Profits-What does the Contribution Margin have to do with Operating Leverage?

(HINT: The key here is the relation between fixed costs and variable costs.) What does a business’s Contribution Margin represent? What does the Contribution Margin have to do with Operating Leverage?

With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage.