Final answer:
The statement is true because operating leverage is affected by the proportion of fixed versus variable costs, which can change when a firm alters its mix of capital and labor. Higher fixed costs through increased capital lead to greater operating leverage, affecting the firm's financial risk and return potential. Option A is correct..
Step-by-step explanation:
The statement 'Operating leverage will change when a firm alters the mix of fixed capital resources and variable labor that it uses' is True. Operating leverage is a measure of how sensitive a company's operating income is to changes in revenue, which fundamentally depends on the mix of variable and fixed costs. When a firm increases its fixed capital resources, it generally assumes higher fixed costs but lower variable costs per unit of production due to increased efficiency and economies of scale.In the long run, companies have the flexibility to adjust all factors of production, thereby changing their production technology to minimize costs. By substituting capital for labor, a firm may increase its operating leverage since capital expenses are fixed in the short term and labor costs are typically variable. This substitution can lead to higher productivity up to a point before diminishing returns set in, as described by the marginal product of labor concept.
Moreover, with a greater reliance on fixed capital, a firm may experience greater volatility in operating income with changes in sales volume. Hence, the degree of operating leverage fluctuates with the changing mix of capital and labor, impacting the firm's risk and potential for profitability.