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Operating vs. Financial Leverage

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What is the difference between operating and financial leverage? What is the importance of assessing operating vs. financial leverage?

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Solution Summary

This solution explains operating leverage versus financial leverage, going into detail on the importance of project evaluation, fixed costs and large percentage changes.

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Operating leverage is the degree to which a firm or project relies on fixed costs. Financial leverage refers to the extent to which a firm relies on debt.

The importance of assessing operating vs. financial leverage is that operating leverage has important implications for project ...

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