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

Illustrate dividend valuation model, Q. Illustrate dividend valuation model...

Q. Illustrate dividend valuation model? The business is being acquired as a going concern and earnings valuations rather than asset valuations are recommended. Even these are b

Which type of financing is appropriate to firm, This case provides the oppo...

This case provides the opportunity to match financing alternatives with the needs of different companies. It allows the reader to demonstrate a familiarity with different types of

What are the rationales of interest swaps, Question: i) What are the ...

Question: i) What are the rationales of interest swaps? ii) You are the corporate treasurer of LSE International Inc. Your firm, rated as AAA, is able to raise capital in

What do you signify by cash, Q. What do you signify by Cash? Cash :- Fo...

Q. What do you signify by Cash? Cash :- For the motive of cash management the term cash not only includes cheques, bank drafts, coins, currency, notes, demand deposits with ban

How financial system works, Question: Part A  The financial syste...

Question: Part A  The financial system is complex in structure and function throughout the world. There are many different types of institutions: banks, insurance compani

Assignment, Imagine you have been allocated $100,000 which is to be investe...

Imagine you have been allocated $100,000 which is to be invested in 8 companies listed on the Australian Stock Exchange (ASX). You are required to have a balanced portfolio betwee

How to calculate the net income of a year, Is the net income of a year the ...

Is the net income of a year the money the company made that particular year or is it a number whose significance is quite doubtful? The net income of a year is not money that a

Finance: Scenario Analysis, Scenario analysis Your firm, Agrico Products, i...

Scenario analysis Your firm, Agrico Products, is considering a tractor that would have a cost of $35,000, would increase pretax operating cash flows before taking account of deprec

State the several goals for the organisation, State the several goals for t...

State the several goals for the organisation As there could be several goals for the organisation, we must try and summarise theorganisational goals in financial terms so that

Financial Planning, report on Financial Planning and Forecasting

report on Financial Planning and Forecasting

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