ATC 11-1

ATC 11-1 Business Applications Operating leverage Description of business for Facebook, Inc. Our mission is to give people the power to share and make the world more open and connected. Our top priority is to build useful and engaging products that enable people to connect and share through mobile devices, personal computers, and other surfaces. We also help people discover and learn about what is going on in the world around them, enable people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their closest friends to the public at large, and stay connected everywhere by accessing our products. Facebook, Inc. 2016 2015 Revenue Operating earnings $27,638 12,427 $17,928 6,225 Description of business for Lowe's Companies, Inc. Lowe's Companies, Inc. and subsidiaries (the Company or Lowe's) is a Fortune 50 company and the world's second largest home improvement retailer. As of February 3, 2017, Lowe's operated 2,129 home improvement and hardware stores, representing approximately 213 million square feet of retail selling space Cost Behavior, Operating Leverage, and Profitat These operations were comprised of 1,820 stores located across 50 U.S. states, including 87 Orchard Supply Hardware (Orchard) stores, as well as 299 stores in Canada, and 10 stores in Mexico. 2016 2015 Lowe's, Inc. Revenue Operating earnings $65,017 5,846 $59,074 4,971 Required 2. Determine which company appears to have the higher operating leverage. b. Write a paragraph or two explaining why the company you identified in Requirement a might be expected to have the higher operating leverage. C. If revenues for both companies increased by 5 percent, which company do you think would likely experience the greater percentage increase in operating earnings? Explain your