--%>
Assignment Help - homework help

Describe High operating leverage

Briefly describe High operating leverage?

E

Expert

Verified

High operating leverage and high financial leverage points out the risky investment made by the company's shareholders. This as well points out that company is making few sales however with high margins. This shows the risk if a firm wrongly forecasts future sales. If the future sales have been scheming forecasted then it makes a differentiation between actual and budgeted cash flow that influences the company's future operating capacity. The financial leverage poses high risk when a company's return on assets does not surpass interest on loan, which lowers down company's profitability and return on equity.

   Related Questions in Business Economics

  • Q : Important source of revenue and major

    What is the most important source of revenue and the major type of expenditure at the Federal level?

  • Q : Explain of the law of demand Explain of

    Explain of the law of demand?

    		•
  • Q : Freedom is to some extent illusory

    Illustrate “freedom is to some extent illusory”?

    		•
  • Q : Define the term invisible hand in

    The “invisible hand” of the marketplace is a word referring to consider as: (w) government policies to set market prices at equilibrium levels. (x) speculative manipulations which create disequilibrium. (y) automatic adjus

    		•
  • Q : Real rate of interest Question: Hubbard

    Question: Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  • Q : Gains from the Exchange Even people who

    Even people who are extremely good at everything couldn’t encompass: (i) absolute benefits in approximately everything. (ii) Much higher incomes than average. (iii) Comparative benefits in everything. (iv) Superior natural endowments of talent.

    Q : Exchange rate in purchasing power parity

    Question: In June 2005, a Big Mac sold for 6,000 pesos in Colombia and $3.00 in the United States.  The exchange rate in June 2005 was 2,300 pesos per US Dollar.  So, on Big Mac purchasing power parity gr

    		•
  • Q : What is the opportunity cost of your

    Suppose you arrive at a store expecting to pay $100 for an item, but learn that a store two miles away is charging $50 for it.  Would you drive there and buy it?  How does your decision benefit you?  What is the opportunity cost of your decision?  Now suppose you arrive at a s

    		•
  • Q : David Hume statement regarding money in

    In modern parlance, David Hume statement regarding money which is Tis none of the wheels of trade. And tis the oil, was referring to the notion that money: (i) is relatively costly to produce. (ii) facilitates divisions of labor and specialization and

    		•
  • Q : What is the basic principle of

    What is the basic principle of comparative advantage?

    		•