Answered: Why would a company want to know their…

Why would a company want to know their operating leverage when they can already calculate the number of units that need to be sold to reach a desired level of profit?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 44MCQ: When a Dupont analysis reveals that a company has much higher than average asset turnover and much...

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When a Dupont analysis reveals that a company has much higher than average asset turnover and much lower than average profit margin, what can be concluded about the companys strategy? a. It is a product differentiator. c. It has no strategy. b. It needs to concentrate on improve- d. It is a low-cost provider ing its profit margins.
Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. How does good operating leverage magnify earnings results with modest revenue increase?
What is meant by a product’s contribution margin ratio? How is this ratio useful in planning business operations? Often the most direct route to a business decision is an incremental analysis. What is meant by an incremental analysis?
If a firm's marginal revenue is smaller than its marginal cost, then the firm should collect additional information before taking any action. increase output to increase profit. keep output the same decrease output to increase profit.
Cost-volume-profit analysis is used to make many decisions, including product pricing and controlling costs. What are the limitations of using operating leverage to predict profitability?
How can the contribution margin be used to determine the profitability of Ford Motor Company's products and how could it be used to make the operations more profitable?
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 income
Which of the following statements accurately describes the "relevant range?" a. The operation range in which fixed costs are expected to remain the same. b. The operation range in which the firm can earn a profit. c. The operation range which can satisfy unusual product demand. d. The operation range in which variable costs rise proportionately.
Cost Behavior - Operating leverage and profitability analysis Discuss how understanding cost behavior leads to better decision-making and increased profits. Make a recommendation as to the best formula to use to assess a company's profitability. Please provide specific examples.
What analysis ensures that the income for the firm will cover its variable costs? a. ratio analysis b. financial analysis c. cost volume profit analysis d. sales analysis
1. how would a cost volume profit analysis would be performed for a company that sells more than one product when the sales mix is known?
Cost-volume-profit (CVP) analysis for revenue planning determines: The desired profit level of a firm. Both revenue maximization and cost minimization. The costs associated with a certain level of revenue. The max amount of revenue a firm can receive. The revenue required to achieve a desired profit level.