Higher operating leverage: Select one: a. means higher proportion of fixed costs within a firm’s overall...
Higher operating leverage: Select one: a. means higher proportion of fixed costs within a firm’s overall cost structure b. leads to more business risk c. leads to higher expected EBIT d. leads to higher risk e. All of the above
Homework Answers
Answer: Option e is correct
All the given options are correct with respect to higher operating
leverage
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Higher operating leverage: Select one: a. means higher proportion of fixed costs within a firm’s overall...
High operating leverage means (choose one): (a) The company has relatively low fixed costs. (b) The...
High operating leverage means (choose one): (a) The company has relatively low fixed costs. (b) The company has relatively high fixed costs. (c) The company will have to sell more units than a comparable company with low operating leverage to break even. (d) The company will have to sell fewer units than a comparable company with low operating leverage to break even. (e) Both (b) and (c) are correct. (f) Both (a) and (d) are correct.
Operating Leverage. High operating leverage means: The company has relatively high fixed costs. The company has...
Operating Leverage. High operating leverage means: The company has relatively high fixed costs. The company has relatively low fixed costs. The company will have to sell fewer units than a comparable company with low operating leverage to break even. The company will have to sell more units than a comparable company with low operating leverage to break even. Both (2) and (3) are correct. Both (1) and (4) are correct.
Integrative-Leverage and risk Firm R has sales of 97,000 units at $2.03 per unit, variable operating costs of $1.67 per unit, and fixed operating costs of $6,070. nterest is $10,080 per year. Firm W...
Integrative-Leverage and risk Firm R has sales of 97,000 units at $2.03 per unit, variable operating costs of $1.67 per unit, and fixed operating costs of $6,070. nterest is $10,080 per year. Firm W has sales of 97,000 units at $2.56 per unit, variable operating costs of $0.97 per unit, and fixed operating costs of $62,400 Interest is $17,200 per year. Assume that both firms are in the 40% tax bracket. a. Compute the degree of operating, financial, and total...
Degree of operating leverage Grey Products has fixed operating costs of $389,000, variable operating costs of...
Degree of operating leverage Grey Products has fixed operating costs of $389,000, variable operating costs of $16.19 per unit, and a selling price of $63.43 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 10,000, 12,000, and 14,000 units, respectively. c. With 12,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....
Degree of operating leverage Grey Products has fixed operating costs of $373,000, variable operating costs of...
Degree of operating leverage Grey Products has fixed operating costs of $373,000, variable operating costs of $16.55 per unit, and a selling price of $63.45 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 11,000, 13,000, and 15,000 units, respectively. c. With 13,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....
Select the correct term for each of the following descriptions. These are not necessarily complete definitions,...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions, but there is only one possible answer for each term. Descriptions Terms The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current, and future conditions and prospects, compared...
Which of the following is considered a part of financial risk? Selected Answer: Answers: A. Demand...
Which of the following is considered a part of financial risk? Selected Answer: Answers: A. Demand variability B. Sales price variability C. The extent to which operating costs are fixed D. Changes in interest rates on debt E. The ability to change prices as costs change Which of the following is an example of business risk? Selected Answer: D. Currency risk Answers: A. Default risk B. Prepayment risk C. Strategic risk D. Currency risk E. Equity risk Which of the...
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...
Widget Co. has higher operating leverage than Gidget Co. This means that in times of increasing...
Widget Co. has higher operating leverage than Gidget Co. This means that in times of increasing sales for their industry: Both Widget and Gidget will benefit equally. Both Widget and Gidget will suffer equally. Gidget will benefit relatively more than Widget. Widget will benefit relatively more than Gidget. Widget Co. has the following variable costs per unit for the widgets that it sells for 10 dollars each: Direct Materials of 2 dollars, Direct Labor of 5 dollars, and Manufaturing Overhead...
Degree of operating leverage—Graphical Levin Corporation has fixed operating costs of 580,000, variable operating costs of...
Degree of operating leverage—Graphical Levin Corporation has fixed operating costs of 580,000, variable operating costs of 96.60 per unit, and a selling price of 59.50 per unit a. Calculate the operating breakeven point in units. b. Compute the degree of operating leverage (DOL) using the following unit sales levels as a base: 27,667, 31.667, 39,667 Use the formula given in the chapter c. Graph the DOL figures that you computed in part (b) (on they axis) against base sales levels...
Integrative-Leverage and risk Firm R has sales of 97,000 units at $2.03 per unit, variable operating costs of $1.67 per unit, and fixed operating costs of $6,070. nterest is $10,080 per year. Firm W has sales of 97,000 units at $2.56 per unit, variable operating costs of $0.97 per unit, and fixed operating costs of $62,400 Interest is $17,200 per year. Assume that both firms are in the 40% tax bracket. a. Compute the degree of operating, financial, and total...
Degree of operating leverage Grey Products has fixed operating costs of $389,000, variable operating costs of $16.19 per unit, and a selling price of $63.43 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 10,000, 12,000, and 14,000 units, respectively. c. With 12,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....
Degree of operating leverage Grey Products has fixed operating costs of $373,000, variable operating costs of $16.55 per unit, and a selling price of $63.45 per unit. a. Calculate the operating breakeven point in units. b. Calculate the firm's EBIT at 11,000, 13,000, and 15,000 units, respectively. c. With 13,000 units as a base, what are the percentage changes in units sold and EBIT as sales move from the base to the other sales levels used in part (b)? d....
Select the correct term for each of the following descriptions. These are not necessarily complete definitions, but there is only one possible answer for each term. Descriptions Terms The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current, and future conditions and prospects, compared...
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...
Degree of operating leverage—Graphical Levin Corporation has fixed operating costs of 580,000, variable operating costs of 96.60 per unit, and a selling price of 59.50 per unit a. Calculate the operating breakeven point in units. b. Compute the degree of operating leverage (DOL) using the following unit sales levels as a base: 27,667, 31.667, 39,667 Use the formula given in the chapter c. Graph the DOL figures that you computed in part (b) (on they axis) against base sales levels...
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