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What factors would cause a difference in the use of financial leverage for a utlility company and an automobile company

What factors would cause a difference in the use of financial leverage for a utlility companyand an automobile company?

Explain how the break-even point and operating leverage are affected by the choice of manufacturing facilitites (labor intensive versus capital intensive)?

What does risk taking have to do with the use of operating and financial leverage?

How does the interest rates on new debt influence the use of financial leverage?

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What factors would cause a difference in the use of financial leverage for a utlility companyand an automobile company?

A utility company would have a more demand. The utility company could calculate future profits with more certainty and therefore increase its financial leverage at a lower risk of incurring the costs of financial distress. An automobile company on the other hand would have more risk, product competition could result in a slump in car sales and therefore volatility in the profit forecast. The automobile company would therefore choose lower financial leverage.

Explain how ...

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"On the other hand, capital intensive manufacturing facilities have higher operating leverage and therefore a higher..."

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