Define the operating leverage effect, Financial Management

Assignment Help:

What is the operating leverage effect and what causes it?  What are the potential benefits and negative consequences of high operating leverage?

The phrase operating leverage effect is the phenomenon whereby a small change in sales triggers a comparatively large change in operating income.  It is origin by the existence of fixed operating costs.  The potential advantages are that if sales are rising operating income will increase more quickly.  The negative consequences are that falling sales will cause operating income to fall more rapidly, involving negative values.


Related Discussions:- Define the operating leverage effect

Lookback options, Can you describe what the payoffs from lookback options d...

Can you describe what the payoffs from lookback options depend on? Can you write in a concise notation the payoff of a floating lookback call? a. What is the payoff of a portfol

Differance between forward start option and a package, 1 Explain the differ...

1 Explain the difference between a forward start option and a package. Outperformance certificates are offered to investors by many European banks as a way of investing in a com

Operating cycle, discuss the applicability of operating cycle in poultry in...

discuss the applicability of operating cycle in poultry industry[consider broilers]

Find the minimum earnings, Milan Corporation is interested in buying a mach...

Milan Corporation is interested in buying a machine that will cost $50,000, and it will depreciate it on straight-line basis over a 5-year period. The machine is expected to last f

Concepts of cost of capital, Concepts of Cost of Capital 1. Explicit ...

Concepts of Cost of Capital 1. Explicit Cost And Implicit Cost The explicit cost of any source of finance may be described as the discount rate that equates the current v

State the rate of return of a bond - debt securities, Rate of return of a B...

Rate of return of a Bond In case of bonds, rather than dividends, investor is entitled to payments of interest yearly or semi-annually. Investor also benefits if there is an ap

Treasury notes or t-notes, Treasury Notes or T-notes are the securiti...

Treasury Notes or T-notes are the securities issued with maturities of more than one year and but not more than 10 years. All these securities are coupon securiti

Liabilities, compare and contract the potential liabilities of owners of pr...

compare and contract the potential liabilities of owners of proprietorship,partnership and corporation

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd