--%>
Assignment Help - homework help

How can we compute operating leverage

How can we compute operating leverage?

E

Expert

Verified

Operating leverage is highest in companies that got fixed operating cost for variable operating cost. It tells investor about the company’s situation and the risk profile of the company. It is evaluated when a company has fixed costs that are apart from the sales volume. When company has fixed cost then the percentage change in profits due to changes in sales volume is larger than the percentage change in sales. The calculation of this is named as degree of operating leverage (or DOL) that gives the extent to that operating profits change as sales volume changes.

DOL (or Degree of operating leverage) = percentage change in income / percentage change in sale.

   Related Questions in Business Economics

  • Q : Supply and demand at tax burdens and

    The new supply and demand curves within University City are S0 and D0. But after the county commission imposed at $3 per six-pack excise tax upon beer: (w) beer sellers' revenue after taxes decreases by $60,000 monthly. (x) buyers and sellers eac

    		•
  • Q : Loathed monopolization and viewed of

    Adam Smith and most of the typical economists who followed instantly in his footsteps: (i) viewed monopoly as no big problem. (ii) encouraged monopolies due to their research and development abilities. (iii) thought monopoly power was a communist plot

    		•
  • Q : Entertainment tax-Indirect tax Why

    Why entertainment tax comes in indirect tax? Answer: Since its burden can be shifted to others.

    		•
  • Q : Inefficiencies and inequities by

    An employer that exaggerates the safety of a position or the prospects for advancement to job applicants makes inefficiencies as well as arguable inequities due to: (1) signaling. (2) credentialism. (3) screening. (4) adverse selection. (5) a moral hazard.

  • Q : Larger amount is actually purchased at

    Critically evaluate:  “In comparing the two equilibrium positions, it note that a larger amount is actually purchased at a higher price. This disprove the law of demand.”

    		•
  • Q : What will be produced in all economic

    What will be produced in all economic systems?

    		•
  • Q : Positive Balance of Payments Question:

    Question: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments." Briefly comment on this

    		•
  • Q : Different types of leverages in

    Write down the different types of leverages which are computed for financial analysis?

    		•
  • Q : Exploit consumers in highly competitive

    This is difficult for firms within highly competitive markets to exploit consumers since: (i) consumer advocates organize boycotts that generate bad publicity. (ii) market pressures force fair distributions of products. (iii) the government sets price

    		•
  • Q : Difference between normal and inferior

    Difference between normal goods and inferior goods. Give illustration.

    		•