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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.
Fixed Costs The costs a rigid incurs doing business that do not change in relation to production. Rent, for example, is a fixed cost because it remains constant whether product
A bond is said to be currently callable if the issue is not protected against early call provision. But most new bond issues, even if currently callable, us
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Under write An arrangement under which the investment banks agree to purchase a certain amount of privacy of a new issue (typically an IPO) at a given date for a given pric
Question 1: (a) Explain fully the following financial accounting techniques: i. Cash accounting ii. Accrual accounting iii. Fund accounting iv. B
1. A company sold a super computer to an Institute in Germany on credit and invoiced DM 10 million payable in six months. Presently, the six-month forward exchange rate is $1.50/DM
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Does high operating leverage always mean high business risk? Explain. High operating leverage does not all the time mean high business risk. If the companies sales are quite
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