Which of the following is a key component in the calculation of operating leverage?

The degree to which fixed costs are used is a fundamental aspect of operating leverage. Operating leverage measures how sensitive a company’s operating income is to changes in sales volume, and it highlights the impact of fixed versus variable costs on a company's profitability.

When a business has a high proportion of fixed costs relative to variable costs, it implies that increases in sales will lead to a more significant increase in operating income, as fixed costs remain constant regardless of sales volume. This results in higher operating leverage. Conversely, if variable costs dominate, changes in sales volume have a less significant effect on operating income since costs increase in tandem with increases in production levels.

While variable costs associated with production, liquidity ratios, and market conditions do play roles in overall business performance and financial health, they are not direct determinants of operating leverage. Variable costs affect the contribution margin but do not solely define operating leverage since it is specifically tied to the mix of fixed and variable costs.