Q: price-earnings ratio that is higher than other similar firms
A: A high price-earning ratio implies more price has to be paid for acquiring the stocks of the firm…
Q: Discuss the advantages and disadvantages of making this assumption.
A: Financial forecasting is defined as the estimation of the future financial outcomes which can be…
Q: Why would a company want to know their operating leverage when they can already calculate the number…
A: Degree of operating leverage means the division of contribution with operating income. Number of…
Q: Neptune Corporation wants to decrease its operating leverage. Which of the following results can the…
A: Operating leverage can be referred to as an accounting measure that determines the impact of revenue…
Q: What is operating leverage? What does it mean if a company has a degree of operating leverage of 3?
A: Operating Leverage: Operating leverage is an outcome of using fixed costs to obtain a higher profit…
Q: Variable costs within the relevant range for a firm are assumed: A. Not to vary per unit.…
A: Variable costs within the relevant range remains constant per unit but changes in total with the…
Q: If a firm increases its use of both operating and financial leverage, then you should expect the…
A: Operating Leverage: Increasing operating income by increasing revenue is a cost-accounting formula…
Q: Can you please give some examples of firms whereby a positive relationship exists between operating…
A: Leverage: The term leverage, in general, refers to a relationship between two interrelated…
Q: 1. The company's margin of safety in units is closest to: Your answer 2. The company's degree of…
A: The margin of safety in accounting seems to be the amount whereby actual or expected sales surpass…
Q: What does it mean if the companies operating leverage is higher or lower than another company!
A: Operating leverage is used to determine the efficiency of the firm to utilize fixed operating…
Q: If a firm is using financial leverage successfully, the ROE should be a. higher than the profit…
A: Answer is option b) Higher than ROA Financial leverage = Earnings Before Interest and Taxes /…
Q: Is it true or false that for a given profit margin and turnover ratio, a greater leverage ratio will…
A: According to DUPONT Analysis, ROE is the function of three ratio. ROE=net profit margin×asset…
Q: How can an unlevered firm uptain financial leverage
A: Unlevered firm is a firm with no debt in its capital structure. It does not have any financial…
Q: Explain how profits or losses can be magnified for a firm with high operating leverage as opposed to…
A: Operating Leverage: It is ratio to change in operating profit to change in revenue. Any change in…
Q: Check all that apply: O Demand variability O Financial leverage O Competition and the abilit O Input…
A: Business risk are those related to the operations of business.
Q: Most organizations use residual income instead of return on investment (ROI) as a performance…
A: The Following statement is True because Residual Income is much better than Return on Investment…
Q: Describe the role that the mix of variable versus fixed costs has in the variation of earnings…
A: EBIT or earnings before interest and taxes is the company's net income before deducting the income…
Q: As fixed operating costs increase and all other factors are held constant, ________. the…
A: The Degree of Operating Leverage (DOL) is a multiple that makes measurement on the amount of…
Q: What is the concept of operating leverage? Describe a scenario where a high degree of operating…
A: Solution- Operating leverage is the a degree to which a firm uses variable and fixed costs in…
Q: If a firm increases its leverage, which extended Du Pont equation ratio is directly affected?
A: Du Pont Equation: The DuPont analysis is a structure for examining fundamental performance spread by…
Q: As a company's sales move farther from its breakeven point(increasing movement), one would expect…
A: Step 1: Operating leverage (OL) is a measure for revenue growth. It is measure of risk in a…
Q: A firm with a high degree of operating leverage: " will have a more significant shift in income as…
A: Degree of Operating Leverage is a relation of contribution margin to the net income. Contribution…
Q: performance
A: The term financial leverage refers to the amount of debt that is used by the company in order to…
Q: While selecting a company for investment, it is good to select company having_____ leverage O a.…
A: Leverage means amount of debt financing done by the company.
Q: What is the appropriate measure of a product's value when a firm is operating under production…
A: Production Bottleneck: Production Bottleneck is a situation of constraint in the manufacturing…
Q: Firms with a high degree of operating leverage:
A: Degree of operating leverage is a measure that determines the quantum of change in a company's…
Q: Which of the following statements about operating leverage is false? O a. If the degree of operating…
A: Operating Leverage = %change in EBIT / % change in sales
Q: Whenever the percentage change in EBIT due to percentage change in sales is lower than the…
A: Operating Leverage defined as “firms ability to use fixed operating costs to magnify effect of…
Q: Which of the following create value in an industry? (Select all that apply.) When value capture…
A: Value capture is the procedure for retaining some percentage of value provided through every…
Q: income tax bracket. Compute the following for the firm: a. Degree of operating leverage b. Degree of…
A: Operating Leverage: It refers to the company's ability to apply fixed costs for generating more…
Q: Which of the following statements about operating leverage is false? O a. All of the given answers…
A: Degree of operating leverage means the division of contribution with net income. It means that how…
Q: A very high degree of operating leverage (DOL) indicates that a firm: A. has high fixed costs. B.…
A: The degree of operating leverage (DOL) is a tool which is used to measure how much the operating…
Q: Under which of the following conditions could the overuse of financial leverage be detrimental to…
A: Financial leverage is more use of debt which continous payment of interest rather than issues of…
Q: Discuss the advantage and disadvantage of level production schedules in firms with cyclical sales.
A: Level Production schedule is or can be very important in the manufacturing industry. Sometimes it…
Q: Airlines offer an example of an industry in which the degree of operating leverage is fairly high.…
A: Leverage There are two types of leverage as mentioned below. Financial leverage Operating leverage…
Q: Briefly explain the tradeoff hypothesis and how it is related to the long-run survival of a firm? “…
A: Leverage means the use of fixed costs, the firm increases manifold or levers up its…
Interpret the effect on operating leverage as a firm’s scale of operations moves in a favorable manner above the break-even point
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- Since the use of leverage can benefit a fum when times are good, a high degree of leverage is typically considered optimal by firms. True falseExplain how profits or losses can be magnified for a firm with high operating leverage as opposed to a firm with lower operating leverageBriefly explain the tradeoff hypothesis and how it is related to the long-run survival of a firm? “ One type of leverage affects both EBIT and EPS. The other type affects only EPS”. Explain this statement.
- A very high degree of operating leverage (DOL) indicates that a firm: A. has high fixed costs.B. has a high net income.C. has high variable costs.D. is operating close to its breakeven point.how does the sales mix affect the calculatin of the break even point, what does operating leverage measure and how is it computedthe link between short-run average costs and long-run average costs? Explain the association between return to scale and economies of scale and suggest the potential sources of internal and external economies of scale. Why might firms face diseconomies of scale and shutdown/break-even situations in the long run?
- What do you think is the relationship between a firm’s operating leverage and its financial leverage? Do you think the two measures are positively correlated, negatively correlated, or unrelated? Explain your answer.The company's margin of safety in units is closest to: The company's degree of operating leverage is closest to:If NUBD Company achieves its projections, what will be its degree of operating leverage?
- Which of the following equations can be used to compute a firm’s magnitude of operating leverage? Net income/sales Fixed costs/contribution margin Net income/gross margin Contribution margin/net incomeCan you please give some examples of firms whereby a positive relationship exists between operating leverage and financial leverage?The extent, or relative size of fixed costs in a company;s total cost structure is known as Financial Leverage True False