Question
In: Finance
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
jeff jeffy answered 2 years agoRelated 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?
What are some labels companies use when they are purchasing
fixed assets?
What form of security for debt provides for “ fixed” security on assets such as land...
What form of security for debt provides for “ fixed”
security on assets such as land and buildings and “floating”
security on moveable assets such as inventory. Explain what happens
in the event of default by the borrower
LAW
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!
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