--%>
Assignment Help - homework help

Define operating leverage effect and its cause

Define operating leverage effect and what causes it? Describe potential benefits and negative consequences of high operating leverage?
The operating leverage effect is the phenomenon where a small change in sales triggers a comparatively large change in operating income. It is caused through the presence of fixed operating costs. The potential benefits are that if sales are increasing operating income will rise more rapidly. The negative consequences are that falling sales will cause operating income to fall more rapidly, including negative values.

   Related Questions in Finance Basics

  • Q : Define Schedule Schedule : The

    Schedule: The explanation of an appropriation in the Budget Bill or Act, exhibiting its distribution to each of the programs, categories, or therefore projects. OR The supplemen

    		•
  • Q : Explain Category Transfer Category

    Category Transfer: It is a permitted transfer between categories or functions within the similar schedule of an appropriation. These transfers are currently authorized by Control Section 26.00 of the Budget Act (and proceeding to 1996-97, by Section 6

    		•
  • Q : What is Budget Act Budget Act (BA): The

    Budget Act (BA): The annual statute authorizing state departments to use up appropriated funds for the aims stated in the Governor's Budget and improved by the Legislature.

    		•
  • Q : Define Reserve Reserve: The amount of a

    Reserve: The amount of a fund balance set sideways to give for expenditures from the unencumbered balance for ongoing appropriations, future apportionments, and economic uncertainties, pending salary or price raise appropriations, and appropriations f

    		•
  • Q : Describe the benefits of paying late

    Describe the benefits of "paying late" (but not too late) and how do companies try to do this? Since money has time value, the later cash is paid, but not too late, the better. Companies employ remote disbursement banks to facilitate holding at

    		•
  • Q : Describe the financial leverage effect

    Describe the financial leverage effect and what causes it? Explain the potential benefits and negative consequences of high financial leverage? Financial leverage is the additional volatility of overall income caused through the presence of fix

    		•
  • Q : What is Appropriation Schedule

    Appropriation Schedule: The detail of an appropriation (example, in the Budget Act), exhibiting the distribution of the appropriation to each of the class, programs, or projects thereof.

    		•
  • Q : Describe significance of excess reserves

    Normal 0 false false

  • Q : State Schedule 11 Schedule 11 : It is

    Schedule 11: It is the outdated word for “Supplementary Schedule of Operating Expenses and Equipment.”

    		•
  • Q : Describe inventory is sometimes thought

    Inventory is sometimes thought of as an essential evil. Describe. Inventory ties up funds and these are not earning an explicit return. Some inventory is frequently necessary, however, as companies attempt to hold the lowest acceptable amount.

    		•