Operating leverage, margin of safety, and cost behavior
What is the accounting concept to explain how a 3% decline in sales could cause a 21% decline in profits. Also, discuss the effect of declining sales on an organization's margin of safety.
Solution Summary
Response is 302 words and a diagram so you can "see" the concepts. Example given in addition to problem posed. Discussion is in everyday language suitable for novice.
Operating leverage, margin of safety and cost behavior. Explain how a 3 percent decline in sales at Home Depot could cause a 21 percent decline in profits. ...
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... very low inventory to reduce our operating cost and to ... such as dollar value and profit margin per transaction ... However, in an effort to leverage the information ...
... offs, expansion financings, middle-market leveraged buyouts and ... industry in which we operate, including manufacturers ... or improve our operating margins with the ...
