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

Explain the re-measurement and translation process, Explain the re-measurem...

Explain the re-measurement and translation process within FASB 52 of translating into the reporting currency the books of a completely owned affiliate that keeps its books in the l

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

APPLICABILITY OF OPERATING CYCLE, #questioDiscuss the applicability of an o...

#questioDiscuss the applicability of an operating cycle in the vegetable growing business n..

Explain the three financial factors that influence the value, List and expl...

List and explain the three financial factors that influence the value of a business. The three factors that influence the value of a firm's stock price are timing , cash flow

Answer to an exercise, dear, I found an exercise on the Internet which coul...

dear, I found an exercise on the Internet which could help me has better to understand the finance, but there were no answers. What is that you can help me has to solve it. I''m fr

Important areas of personal financial management, Gary and Joyce Yau, both ...

Gary and Joyce Yau, both 30, last month bought their dream house in London, Ontario. The purchase price was $450,000 plus addition fees such as taxes, legal fees, administration fe

Approaches, Briefly discuss the three approaches to the short-term financin...

Briefly discuss the three approaches to the short-term financing problem and provide relevant examples of each?

Financial management, Financial Management: Financial management is, in...

Financial Management: Financial management is, in its most basic interpretation, the management of costs against revenue. Other management initiatives, such as marketing, are d

Measuring interest rate risk , Investors are always interested in est...

Investors are always interested in estimating the price sensitivity of a bond to change in market interest rates. Let us study how prices change both in terms of

Floating-rate securities that have adjustable quoted margin, Floaters ...

Floaters that can be classified under this head are: 1. Stepped Spread Floaters 2.  Extendible Reset Bonds

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