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Operating leverage: the same sales growth, very different profit growth
The prompt
Two companies in Singapore each have revenue of SGD 1 million (1,000 thousand) and profit of SGD 100 thousand. All figures below are in SGD thousands. Company A has variable costs of 200 and fixed costs of 700. Company B has variable costs of 700 and fixed costs of 200. Sales rise 10 percent at both. What happens to profit?
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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