Causes of high degree of operating leverage

Assignment Help Accounting Basics
Reference no: EM1363614

What conditions/factors cause a business to have a high degree of operating leverage as compared to others?

It is a good idea to understand the percentage of margin we are creating. In this way, we can keep an eye on the amount of revenue, cost and gross profit; and compare these to prior periods so we can review the trends and use the information to make decisions. What other information can this tell us?

It is good to purchase a large quantity of widgets, or will you possibly get stuck in the end with a warehouse full of unsellable widgets?

This is also the idea of covering your costs. The margin itself is how much "profit" or gross profit we make "per unit sold". That is, the sales value less the cost of making that particular item. The cost to manufacture will be the materials and labor. The remainder will be profit to be used to pay our other general expenses. What else can we use this information for? If the margin is not positive, or large enough, what steps can we take to correct this?

Reference no: EM1363614

Questions Cloud

Cardiac output and cardiac workload : How do heart rate, preload, afterload, and contractility affect cardiac output and cardiac workload?
Analogical reading : Explain the concept of analogical reasoning and describe a decision in your personal life that would have benefited from analogical reasoning.
Explain what are the some of the factors that influence : Explain what are the some of the factors that influence and have your purchasing habits of your parents and/or grandparents influenced your buying behavior
Classify occurrences as an incident or disaster : Classify each of the following occurrences as an incident or disaster. If an occurrence is a disaster, determine whether or not business continuity plans would be called into play.
Causes of high degree of operating leverage : What conditions/factors cause a business to have a high degree of operating leverage as compared to others?
Padding information on your resume : Is it wrong to pad your resume with information that, while not outright lie, is an enhancement?
Security standards in health care organization : Review the HIPPA Security Standard Matrix. Research the internet and find an article or case study, discuss the impact of one or more of these security standards in a health care organization.
What are the changes in the objects momentum and velocity : What are changes in the object's momentum and velocity. How much work is done if the similar tension is directed parallel to the snow.
Write program to allow two users to play tic-tac-toe : Write a program that will allow two users to play tic-tac-toe. The program should ask for moves alternately from player X and player O.

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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