--%>
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 : Purchasing power parity of US and

    Under what condition would the U.S. dollar and the Canadian dollar said to be have achieved purchasing power parity? The U.S. dollar and the Canadian dollar would be assumed to have achieved purchasing power parity while the exchange rate reflec

    		•
  • Q : What is the efficiency factor Normal 0

    Normal 0 false false

  • Q : Explain Administration Program Costs

    Administration Program Costs: It is the indirect cost of a program, usually a share of the costs of the administrative units serving the whole department (example, the Director's Office, Personnel, Legal, Accounting, and Business Serv

    		•
  • Q : Supply and demand 1. Albert Jones went

    1. Albert Jones went to his local department store to purchase a pair of Levi s. He thought that the style of Levi that he wanted would sell for about $30 a pair. When he got to the store, he saw a sign which said, Levi s, all styles, $18 a pair. Albert bought three pairs of Levi s. The behavior of

    		•
  • Q : Define Augmentation Augmentation : An

    Augmentation: An authorized raise to a formerly authorized appropriation or allotment. This augment can be authorized by the Budget Act provisional language, control sections, or other legislation. Generally a Budget Revision or an Ex

    		•
  • Q : Causes and solution to international

    causes and solutions to international bank crisis

    		•
  • Q : Describe the fact of common

    Normal 0 false false

  • Q : Financial Account & International fund

    Question: The Financial Account captures international fund flows due to i._____. ii. Briefly Explain? Answer: (i)    Purchase and selling of assets (ii)   The Financial Account captures th

    		•
  • Q : Which ratios would long-term bond

    Which ratios would a potential long-term bond investor is most interested in? Describe. Current & potential lenders of long-term funds, such like banks & bondholders, are interested in debt ratios. While a business's debt ratios rise sig

    		•
  • Q : What are the Changes in Authorized

    Changes in Authorized Positions (“Schedule 2”): This is a schedule in the Governor’s Budget which reflects staffing changes made following to the adoption of the present year budget and enacted legislation. This planned document modi

    		•