Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Q. Illustrate the Operating Leverage?
Operating Leverage: - The operating leverage perhaps defined as the tendency of the operating profit to differ disproportional with sales. It is said to survive when a firm has to pay fixed cost regardless of volume of output or sales. The firm is supposed to have a high degree of operating leverage if it employs a greater amount of fixed cost and a smaller amount of variable cost. Alternatively a firm will have a low operating leverage when it employs a greater amount of variable cost as well as a smaller amount of fixed cost. Therefore the degree of operating leverage depends upon the amount of fixed element in the cost structure.
Operating leverage in the company is a function of three factors:-
(a) The amount of fixed cost
(b) The contribution margin
(c) The volume of sales
Formulae:-
Operating leverage = Contribution / Operating profit or C/OP
Utility: - The operating leverage point outs the impact of change in sales on operating income. If a firm has a elevated degree of operating leverage small changes in sales will have large effect on operating income. Alternatively the operating profit (EBIT) of such firm will rise at a faster rate than the increase in sales.
Likewise the operating profit of such a firm will suffer a great loss as compared to reduction in its sales.
The securing of the working capital needed for the support of raises in accounts receivable and inventory related with an organizations initial expansion time.
Advantage of mutual funds Mutual Funds are advantageous to individual investors in relation to their direct involvement in investment portfolio activity covering the following
All the bonds are not making periodic coupon payments. Zero-coupon bonds are those bonds where the bondholder realizes interest by buying it at a deep discount to its face
name the concept which increases the return on equity shares by changing the capital structure of the co.
The following are extracts of the Income Statement and Balance Sheet for Umar plc. Extract Balance Sheet at 30 June 20X2 20X1 £'000 £'000 £
what is saving and lone function in ethiopian context
Insider Trading Insider trading refers to dealing in securities by persons who are privy to specific information of companies. This possession of confidential information gives
evaluate the importance of leverage in a small scale companyestion..
What is a sunk cost? Is it relevant while evaluating a proposed capital budgeting project? Explain. A sunk cost is a cash flow which has previously occurred, or that will take
What is the relationship between a bond's market price and its promised yield to maturity? Explain. A bond's market price reckon on its yield to maturity (YTM). When a bond h
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd