What is operating leverage, and how does it affect a firm's business risk? Show the operating break

Question:

What is operating leverage, and how does it affect a firm's business risk? Show the operating break even point if a company has fixed costs of $200, a sales price of $15, and variables costs of $10.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance A Focused Approach

ISBN: 978-1439078082

4th Edition

Authors: Michael C. Ehrhardt, Eugene F. Brigham

See More Books

Question Posted: Sep 22, 2011 05:08 PM

See More Questions

What is operating leverage, and how does it affect a firms business risk?
What is information asymmetry, and how does it affect insurance companies?
What is corporate culture and how does it affect communication?
What pricing system is used to price the water you use at your college or university? Does this pricing system affect your behavior about water use (length of showers, etc.)? How? Could you recommend...
Refer to the data provided in the P 21-4 for Dux Company. P 21 - 4 Required: Prepare the statement of cash flows for Dux Company. Use the T-account method to assist in your analysis. DUX COMPANY...
The two solid homogeneous right-circular cones, each of mass m, are fastened together at their vertices to form a rigid unit and are spinning about their axis of radial symmetry at the rate p = 200...
What is yield management? What are the appropriate strategies for high- and low-demand periods?
Taylor Orlando began Taylor Roofing, his roofing business, on March 1, 2022. On March 31, the balances in the accounts were as follows. Cash $9,000, Accounts Receivable $2,000, Equipment $8,000,...
Beginning inventory, purchases, and sales for an inventory item are as follows: Sep. 1 Beginning Inventory 23 units @ $14 5 Sale 13 units 17 Purchase 25 units @ $16 30 Sale 24 units Assuming a...
After taking business classes, Jake, an avid dog-lover, decided to start selling unique pet supplies at trade shows. He has two products: Product 1: "Launch-it"- a tennis ball thrower that will sell...
What is business risk? What factors influence a firm's business risk?
Now, to develop an example which can be presented to PizzaPalaces management to illustrate the effects of financial leverage, consider two hypothetical firms: Firm U, which uses no debt financing,...
a. Identify two factors the auditor should consider in allocating financial statement materiality to accounts. b. If the amount of error found in an account is less than its materiality allocation,...
On January 1, 20X1, Popular Creek Corporation organized SunTime Company as a subsidiary in Switzerland with an initial investment cost of Swiss francs (SFr) 76,000. SunTime's December 31, 20X1, trial...
In November 2 0 2 4 , Lily informed you that she needs additional cash flow to meet her personal debt obligations. Lily does not want to sell more stock than she needs to because she wants...
Bennett limited provides mobile library services to the community of longbourn. bennett has preliminary operating results for the first year and the company found that net income is different from...
What is printed when the value of x is 34? if (x < 32 ) { if (x22) { } System.out.println("Blue"); else if (x <10) { } System.out.println("Red"); else if (x > 25 ) { System.out.println("Yellow"); } }...
Heidi expresses concern in the video that when employees are also friends, holding them accountable for performance "doesn't come as naturally" to her. She asks you, "Does my focus on relationship...
Recognize behavioral, cognitive, and social approaches to learning, and describe their differences and limitations. LO.1
A superior criticized a sales manager for selling high-revenue, low-profit items instead of lower-revenue but higher-profit items. The sales manager responded, My income is based on commissions that...
(a) Repeat Exercise 31.57 but include the 0.0055% natural abundance of 234 U with its 2.45 x 10 5 y half-life. (b) What is unreasonable about this result? (c) What assumption is responsible? (d)...
Last year Cole Furnaces had $4 million in operating income (EBIT). The company had a net depreciation expense of $1 million and an interest expense of $1 million; its combined federal and state...
Begin with the partial model in the file Ch02 P20 Build a Model.xlsx on the textbook?s Web site. a. Britton String Corp. manufactures specialty strings for musical instruments and tennis racquets....
Begin with the partial model in the file Ch02 P21 Build a Model.xlsx on the textbook?s Web site. a. Using the financial statements shown here for Lan & Chen Technologies, calculate net operating...
Jen bought 100 shares of ABC stock at $15 a share on July 14, 2017. On August 7, 2018, she noticed that the stock had increased in value to $20 a share and decided to sell her shares. Jen's marginal...
Alex. Inci, buys 40 petcent of Steinbart Company on January 1, 2020, for $1.212.000. The equity method of accounting is to be used. Steinbart's net assets on that datewere $2.90 million. Any excess...
exercise 4-7 (Algo) Effects of transactions on income statement LO P2

What is operating leverage, and how does it affect a firm's business risk? Show the operating break

Question:

Step by Step Answer:

Operating leverage is the change in EBIT caused by a change in quantity sold The higher the prop...View the full answer

Corporate Finance A Focused Approach

Students also viewed these Corporate Finance questions