Question
In: Finance
Differentiate between operating levrage and financial leverage.
Differentiate between operating levrage and financial leverage.
Solutions
jeff jeffy answered 6 months agoRelated Solutions
What is operating leverage? What is financial leverage? Explain how greater operating and financial leverage changes...
What is operating leverage? What is financial leverage? Explain
how greater operating and financial leverage changes the riskiness
of the firm to its shareholders.
When estimating the NPV of a project, what are the numerators
in the PV formula? What are the denominators? Could the NPV ever be
negative? Why? In that event, is the decision “go” or “no go”?
Why?
Dividends can have a signaling effect. What is the signal from
a decision to start paying dividends? Of increasing...
Calculate the degree of operating leverage, degree of financial leverage, and degree of total operating leverage given:
Calculate the degree of operating leverage, degree of financial leverage, and degree of total operating leverage given: Revenue grows from $200 to $230 EBIT grows from $50 to $60 NI grows from $20 to $28
What is the difference between operating and financial leverage? What are risks of having an excessive...
What is the difference between operating and financial leverage?
What are risks of having an excessive amount of financial leverage
in an organization? What is the degree of total leverage?
Discuss the advantages and disadvantages of operating and financial leverage.
Discuss the advantages and disadvantages of operating and
financial leverage.
A8. What is meant by the term leverage? How do operating leverage, financial leverage, and total...
A8. What is meant by the term leverage? How do operating
leverage, financial leverage, and total leverage relate to the
income statement?
(a) (8 marks) Calculate the operating leverage (OL) and financial leverage (FL) for a firm with...
(a) Calculate the operating leverage (OL) and
financial leverage (FL) for a firm with sales of 1,000 units with a
selling price of 10$/unit, variable cost of 6$/unit, fixed costs
(excluding financial charges) of 1,500$, and interest of 750$.
Check your answers by using the elasticity definition of leverage
and sales of 1,100 units.
(b) What is the combined leverage (O&FL) in (a)?
explain what this means if volume increases by 10%.
(c) ( 2 marks) why are taxes and...
(a) (8 marks) Calculate the operating leverage (OL) and financial leverage (FL) for a firm with...
(a) Calculate the operating leverage (OL) and
financial leverage (FL) for a firm with sales of 1,000 units with a
selling price of 10$/unit, variable cost of 6$/unit, fixed costs
(excluding financial charges) of 1,500$, and interest of 750$.
Check your answers by using the elasticity definition of leverage
and sales of 1,100 units.
(b) What is the combined leverage (O&FL) in (a)?
explain what this means if volume increases by 10%.
(c) ( 2 marks) why are taxes and...
(a) (8 marks) Calculate the operating leverage (OL) and financial leverage (FL) for a firm with...
(a) Calculate the operating leverage (OL) and
financial leverage (FL) for a firm with sales of 1,000 units with a
selling price of 10$/unit, variable cost of 6$/unit, fixed costs
(excluding financial charges) of 1,500$, and interest of 750$.
Check your answers by using the elasticity definition of leverage
and sales of 1,100 units.
(b) What is the combined leverage (O&FL) in (a)?
explain what this means if volume increases by 10%.
(c) ( 2 marks) why are taxes and...
(a) (8 marks) Calculate the operating leverage (OL) and financial leverage (FL) for a firm with...
(a) Calculate the operating leverage (OL) and
financial leverage (FL) for a firm with sales of 1,000 units with a
selling price of 10$/unit, variable cost of 6$/unit, fixed costs
(excluding financial charges) of 1,500$, and interest of 750$.
Check your answers by using the elasticity definition of leverage
and sales of 1,100 units.
(b) What is the combined leverage (O&FL) in (a)?
explain what this means if volume increases by 10%.
(c) ( 2 marks) why are taxes and...
A decrease in a firm's financial leverage will: A. Increase the operating risk of the firm....
A decrease in a firm's financial leverage will:
A. Increase the operating risk of the firm.
B. Decrease the value of the firm in a non-MM world.
C. Decrease the WACC.
D. Reduce the variability in earnings per share.
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