Homework Answers
Answer: Option D is correct
None of the given options are true with regard to the concept of
leverage.
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Which of the following is true about the concept of leverage? O A. at the breakeven point, operating leverage is equal...
27. Which of the following is a key determinant of operating leverage? Level of debt Physical...
27. Which of the following is a key determinant of operating leverage? Level of debt Physical location of production facilities. Cost of debt. Technology Capital structure, 28. Which of the following is a key determinant of financial leverage? Level of debt. Technology Labor costs. Amount of fixed assets used by the firm. Variable cost of goods sold. 29. Which of the following is (are) typically part of the cash budget? Payments lag. Payment for plant construction Cumulative cash All of...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above
Which of the following is true about the degree of operating leverage?
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above Question 12 What does the beta measure? unsystematic risk. systematic risk diversifiable risk company-specific risk Question 14 Why do we use Capital Asset Pricing Model (CAPM)? because it is...
At the operating breakeven point, the sales revenue is equal to the sum of the fixed...
At the operating breakeven point, the sales revenue is equal to the sum of the fixed and variable operating costs. True False
degree of operating leverage and financial leverage
reflects last year’s operations:Sales $18,000,000Variable costs 7,000,000Revenue before fixed costs $11,000,000Fixed costs 6,000,000EBIT $5,000,000Interest expense 1,750,000Earnings before taxes (EBT) $3,250,000Taxes 1,250,000Net income $2,000,000REQUIRED:1. At this level of output, what is the degree of operating leverage?2. What is the degree of financial leverage?3. What is the degree of combined leverage?4. If sales increase by 15%, by what percent would EBT (and net income) increase?5. What is your firm’s break-even point in sales dollars?
If a company is currently operating at its breakeven point, which of the following statements is...
If a company is currently operating at its breakeven point, which of the following statements is true? Multiple Choice 1 0 if fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. 0 if sales increase by 20%, net income will also increase by 20%, assuming that fixed costs are not equal to zero. 0 if variable costs double, net income will decrease by 50%. 0 if sales decrease,...
Which of the following statements regarding Operating Leverage is true? The degree of operating leverage is...
Which of the following statements regarding Operating Leverage is true? The degree of operating leverage is the same as the Margin of Safety percentage Organizations with high operating leverage incur more risk of loss when sales decline. The degree of operating leverage is the extent to which the cost function is made up of variable costs. Is measured as Earnings/Contribution Margin
Through the effects of financial leverage, when EBIT increases, O earnings per share will decrease O...
Through the effects of financial leverage, when EBIT increases, O earnings per share will decrease O earnings per share will increase O fixed operating costs will decrease O fixed operating costs will increase
Capital structure 28. Which of the following is a key determinant of financial leverage? Level of...
Capital structure 28. Which of the following is a key determinant of financial leverage? Level of debt Technology Labor costs b. c. Amount of fixed assets used by the firm. Variable cost of goods sold. d. e. 29. Which of the following is (are) typically part of the cash budget? Payments lag. Payment for plant construction Cumulative cash All of the above Only answers a and c above. 30. The financial breakeven point for a firm is defined as the...
How can I determine current DOL (degree of operating leverage), DFL (degree of financial leverage), and...
How can I determine current
DOL (degree of operating leverage), DFL (degree of financial
leverage), and DCL (degree of combined leverage)? If maximization
of earning per share is the goal, what is the indifference EBIT
(EBIT*)? Also, Once the expansion is completed, the sales are
expected to increase to $5,000,000. How can I calculate the new
EBIT. At the new EBIT which method of financing results in a higher
EPS? Calculate EPS for both plans at this new EBIT.
new...
27. Which of the following is a key determinant of operating leverage? Level of debt Physical location of production facilities. Cost of debt. Technology Capital structure, 28. Which of the following is a key determinant of financial leverage? Level of debt. Technology Labor costs. Amount of fixed assets used by the firm. Variable cost of goods sold. 29. Which of the following is (are) typically part of the cash budget? Payments lag. Payment for plant construction Cumulative cash All of...
Question 10 Which of the following is true about the degree of operating leverage? Operating leverage is higher if fixed operating costs are high relative to variable operating costs Higher operating leverage increases the sensitivity of operating income to changes in sales Operating leverage magnifies both profits and losses, helping in the good times and causing pain in the bad times All of the above
If a company is currently operating at its breakeven point, which of the following statements is true? Multiple Choice 1 0 if fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. 0 if sales increase by 20%, net income will also increase by 20%, assuming that fixed costs are not equal to zero. 0 if variable costs double, net income will decrease by 50%. 0 if sales decrease,...
Through the effects of financial leverage, when EBIT increases, O earnings per share will decrease O earnings per share will increase O fixed operating costs will decrease O fixed operating costs will increase
Capital structure 28. Which of the following is a key determinant of financial leverage? Level of debt Technology Labor costs b. c. Amount of fixed assets used by the firm. Variable cost of goods sold. d. e. 29. Which of the following is (are) typically part of the cash budget? Payments lag. Payment for plant construction Cumulative cash All of the above Only answers a and c above. 30. The financial breakeven point for a firm is defined as the...
How can I determine current
DOL (degree of operating leverage), DFL (degree of financial
leverage), and DCL (degree of combined leverage)? If maximization
of earning per share is the goal, what is the indifference EBIT
(EBIT*)? Also, Once the expansion is completed, the sales are
expected to increase to $5,000,000. How can I calculate the new
EBIT. At the new EBIT which method of financing results in a higher
EPS? Calculate EPS for both plans at this new EBIT.
new...
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