Leasing fixed assets instead of purchasing those assets is one form of operating leverage. According to...

Leasing fixed assets instead of purchasing those assets is one form of operating leverage. According to the DuPont Identity, an increase in operating leverage will also:

Increase the return on equity

Decrease total asset turnover

Increase the debt-to-equity ratio

Increase the return on assets

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Instead of purchasing assets outright many companies lease assets either for operational purposes or as a...

Instead of purchasing assets outright many companies lease assets either for operational purposes or as a means of asset acquisition. Please explain the differences between the 2 types of leases, capital and operating, and explain how both the lessee and the lessor view these arrangements and provide a clear discussion of the process each uses to determine whether to enter into a leasing arrangement.

Operating leverage refers to the use of fixed costs to increase percentage changes in operating income...

Operating leverage refers to the use of fixed costs to increase percentage changes in operating income when sales volume changes. True False

Degree of operating leverage Grey Products has fixed operating costs of $390,000, variable operating costs of...

Degree of operating leverage Grey Products has fixed operating costs of $390,000, variable operating costs of $16.35 per unit, and a selling price of $63.44 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 9,000, 10,000, and 11,000 units, respectively. c. With 10,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....

Degree of operating leverage Grey Products has fixed operating costs of $390,000, variable operating costs of...

Degree of operating leverage Grey Products has fixed operating costs of $390,000, variable operating costs of $16.06 per unit, and a selling price of $63.54 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 11,000, 13,000, and 15,000 units, respectively. c. With 13,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....

Degree of operating leverage Grey Products has fixed operating costs of $ 382 comma 000, variable...

Degree of operating leverage Grey Products has fixed operating costs of $ 382 comma 000, variable operating costs of $ 15.93 per unit, and a selling price of $ 63.05 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 11 comma 000, 12 comma 000, and 13 comma 000 units, respectively. c. With 12 comma 000 units as a base, what are the percentage changes in units sold and EBIT as sales move...

CH13 Leverage refers to the use of fixed costs to increase the return to shareholders. Operating...

CH13 Leverage refers to the use of fixed costs to increase the return to shareholders. Operating leverage is the use of fixed operating costs such as fixed cost of goods sold and depreciation to magnify the earnings before interest and taxes. The degree of operating leverage (DOL) = % change in EBIT / % change in Sales. Financial leverage refers to the use of fixed financing costs such as long-term debts to magnify the return to shareholders. The degree of...

What are some labels companies use when they are purchasing fixed assets?

1.Operating leverage enables a company to convert small changes in fixed costs into dramatic changes in...

1.Operating leverage enables a company to convert small changes in fixed costs into dramatic changes in profitability. True False 2. If a company decreases its fixed costs and increases its variable costs, it will lower both the level of risk and its potential for profits. True False 3 If revenues are expected to decline, management should attempt to convert its fixed costs into variable costs. True False Can you give an explanation, please ?

Reflect upon the differences between purchasing a $30,000 vehicle and leasing it. Provide one scenario in...

Reflect upon the differences between purchasing a $30,000 vehicle and leasing it. Provide one scenario in which it would be advantageous for a company to purchase the vehicle and another scenario in which it would be advantageous to lease. * Please explain clearly your answer. Thank you!

What does it mean when they say with operating leverage you use fixed costs to maximize return?

What does it mean when they say with operating leverage you use fixed costs to maximize return? How can you used fixed costs for that?

Subjects