--%>
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 : Determine the Relative Price of given

    When turkey is $1 per pound and the relative price of ham to turkey is 2, in that case a pound of ham costs: (i) 50 cents. (ii) 1/2 pound of turkey. (iii) 2 pounds of turkey. (v) 12 pesetas. (iv) 5 euros. How can I

    		•
  • Q : What are the facts of inflation What

    What are the facts of inflation?

    		•
  • Q : Major implication of invisible hand of

    The major implication of Adam Smith’s conception of an “invisible hand” was such that: (w) pursuit of individual self interest must be controlled. (x) most people lose sight of what’s good for society. (y) most

    		•
  • 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 : Adopting policy of paying efficiency

    The expected losses to workers by shirking are increased while a firm adopts a policy of: (1) dividing productive tasks therefore the division of labor is optimal. (2) paying efficiency wages that exceed market-clearing wages. (3) avoiding legal liability from not wri

    		•
  • Q : Comparative advantage in production I

    I have a problem in economics on Comparative advantage in production. Please help me in the following question. The oranges are grown in Florida and potatoes are grown in Maine mainly since: (i) orange-grower’s in Maine have not lobbied effectiv

    		•
  • Q : Why Public or social goods not be

    Why Public or social goods not be produced through the market?

    		•
  • Q : Principle of comparative advantage When

    When Gene can make three pairs of cowboy boots per week or one saddle whereas Roy can make either two pairs of boots or two saddles, Gene will form boots whereas Roy makes saddles according to the: (i) Law of Occam’s Razor. (ii) Principle of comparative advantag

    		•
  • Q : Example of simultaneous changes in both

    Elucidate an example of simultaneous changes in both supply and demand?

    		•
  • Q : What happens in the product markets

    What happens in the product markets?

    		•