What is operating leverage and what cause operating leverage

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Reference no: EM133208321

Problem

Given below are the Operating, Financial, and Total leverage of Cai Corporation and Lanze Corporation.

                              Cai Corp.    Lanze Corp.
Operating Leverage     1.25             1.71
Financial Leverage      1.71             1.25
Total Leverage           2.14             2.14

Problem 1. Considering that the total leverage of the two company is 2.14. Which of the two company has a better operating leverage and which of the two has a better financial leverage? Why?

Problem 2. What is operating leverage and what causes operating leverage?

Problem 3. What is financial leverage and what causes financial leverage?

Reference no: EM133208321

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