What is the operating leverage effect and what causes it, 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 operating leverage effect is the fact whereby a small change in sales activates a relatively large change in operating income.  It is happened by the presence of fixed operating costs.  The potential paybacks are that if sales are rising operating income will rise more quickly.  The negative penalties are that falling sales will happen operating income to fall more quickly including negative values.

 


Related Discussions:- What is the operating leverage effect and what causes it

State the term- dividend cover, Dividend cover Dividend cover = Profit ...

Dividend cover Dividend cover = Profit available to ordinary shareholders (PAT) / Annual dividend(no. of times) Or =    EPS/Dividend per share Dividend cover shows safety

Yield curve risk, The graphical representation of the relationship between ...

The graphical representation of the relationship between yield and maturity is known as yield curve. Yield curve risk is the risk of experiencing an adverse

Financial evaluation and decision making, Financial Evaluation and Decision...

Financial Evaluation and Decision Making: The final major element of financial management is the evaluation of the information provided through the accounting and budget proces

Approximating the percentage price change using duration, Let us expr...

Let us express the process of calculating approximate percentage price change for a given change in yield and a given duration using the following formula:

How the export promotion trade strategy, Question 1: (i) How are educa...

Question 1: (i) How are education and economic growth connected? (ii) Explain how the export promotion trade strategy may be more growth promoting for developing economies,

maximization of a company''s share, a. The primary financial objective of ...

a. The primary financial objective of a company is the maximization of the wealth of shareholders ...per corporate finance theory.    Though, this objective is usually replaced by

Examine the concepts related to financial management, Assume you are a prof...

Assume you are a professional financial analyst working for a wealthy investor.  Your client has $2.6 million to invest and wants to sink it into a single stock (diversification is

Buy and hold - passive strategy, A simple passive strategy involves b...

A simple passive strategy involves building a portfolio and holding it through time. The coupons as well as the proceeds of matured bonds are just reinvested in new iss

Inflation in international markets, Inflation in International Markets ...

Inflation in International Markets In 1983, Gultekin tried to find out the relation between stock return and the inflation rates (expected/unexpected). He accomplished this by

Define trustworthy collateral from the lenders perspective, What is trustwo...

What is trustworthy collateral from the lenders' perspective?  Explain whether accounts receivable and inventory are trustworthy collateral. Assets which are readily marketable

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