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Differences between Operating and Financial Leverage

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Please help with the following problem regarding the differences between operating and financial leverage. Provide at least 200 words and include references in the solution.

Compare operating and financial leverage. How do they differ? What are risks of having excessive financial leverage? Explain the term degree of total leverage.

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Assessing the Differences Between Operating and Financial Leverage

What is the difference between operating and financial leverage?

Operating leverage is the proportion of total costs that are fixed and therefore will not grow or contract with growth or cutbacks in volume. Financial leverage is the difference between return on assets and cost of capital. That is, what is the spread between what you earn on your funds and the cost to obtain those funds. So, ...

Solution Summary

The following posting discusses the differences between operating and financial leverage. The discussion is given in 243 words and two references and is suitable for an intermediate level student.

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