Question
In: Finance
Why is operating leverage so crucial to profit growth? Should companies be ready to replace variable...
Why is operating leverage so crucial to profit growth? Should companies be ready to replace variable costs such as labor with fixed costs such as technology and automation?
Solutions
jeff jeffy answered 10 months agoRelated Solutions
Generally, a company will only pay dividends if it makes a profit, and high-growth companies should...
Generally, a company will only pay dividends if it makes a
profit, and high-growth companies should give priority to expansion
and investment. However, there are many strange phenomena in the
capital market. Some companies will borrow money to pay dividends
to shareholders. Some high-growth companies that urgently need
capital have been paying dividends. Do you think these phenomena
are reasonable? What are the possible reasons behind them?
With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater...
With regards to Operating Leverage, please explain why a company
with HIGH Operating Leverage faces greater financial risk in a
declining sales period compared to a company with LOW Operating
Leverage. (HINT: The key here is the relation between fixed costs
and variable costs.)
What does a business's Contribution Margin represent? What does
the Contribution Margin have to do with Operating Leverage?
With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater...
With regards to Operating Leverage, please explain why a
company with HIGH Operating Leverage faces greater financial risk
in a declining sales period compared to a company with LOW
Operating Leverage. (HINT: The key here is the relation between
fixed costs and variable costs.)
What does a business's Contribution Margin represent? What
does the Contribution Margin have to do with Operating
Leverage?
“Physicians…are crucial to… overall success”. Why is this so? If it is so, name some good...
“Physicians…are crucial to… overall success”. Why is this so? If
it is so, name some good steps for senior management to take with
the medical staff?
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....
What types of companies or industries might be high operating leverage companies? What are some examples?...
What types of companies or industries might be high operating
leverage companies? What are some examples? What is the benefit of
high operating leverage? What is the danger of high operating
leverage?
An investor prefers to invest in companies that have high operating leverage. How can this be...
An investor prefers to invest in companies that have high
operating leverage. How can this be accomplished if the investor
also requires a portfolio beta of 1.0?
Multiple Choice
Invest 50% in cyclical stocks and 50% in firms with high
operating leverage
Invest 50% in a market index fund and 50% in firms with high
operating leverage
Finance part of the portfolio with borrowing
Invest a portion of the portfolio in U.S. Treasury
securities
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...
Explain why productivity growth, saving and new technologies are crucial for maintaining economic growth. Describe how...
Explain why productivity growth, saving and new technologies are
crucial for maintaining economic growth.
Describe how immigration and property rights influence economic
growth
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