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

Normal spread, After the calculation of cash flow yield and the...

After the calculation of cash flow yield and the average life of the asset-backed and mortgage-backed security based on default, prepayment and recovery ass

Compounding technique for calculating time value of money, COMPOUNDING TECH...

COMPOUNDING TECHNIQUE is the method of calculating the future values of cash flows and involves calculating compound interest.  Under this process, interest is compounded when the

Motivate the actions of a firms financial manager, Q. What goals should alw...

Q. What goals should always motivate the actions of a firm's financial manager and why? Answer:   Please note that a minimum of 250 words is required on all responses to the d

CVP analysis, What is the meaning of Breakeven point?

What is the meaning of Breakeven point?

Determine the factors which common stockholders consider, What are some of ...

What are some of the factors which common stockholders consider while deciding how much, if any, cash dividends they desire from the corporation in which they have invested? Comm

Observation of capital structure, Q. Observation of capital structure? ...

Q. Observation of capital structure? Droxfol Co has long-term funding provided by ordinary shares preference shares and loan notes. The rate of return necessary by each source

MONEY DEMAND, #question.After read all the available information carefully,...

#question.After read all the available information carefully, prepare a two page (double-spaced) essay and answer the following questions: Assume that we have the following data: C

Aims of financial services authority, Aims of FSA The aim of FSA is to ...

Aims of FSA The aim of FSA is to promote efficient, orderly and fair markets, and to help retail consumers to get a fair deal. In fact, FSA has set out its aims under three bro

Explain official reserve assets and its major components, Explain official ...

Explain official reserve assets and its major components. Answer:  Official reserve assets are those financial assets which can be employed as international means of payments.

Debenture, Debenture A kind of debt instrument that is not secured by p...

Debenture A kind of debt instrument that is not secured by physical any asset or collateral is known as debenture. Debentures are backed by the general creditworthiness and sta

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