Profits larger or smaller if firm increased operating leverage
Changes in sales can cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage? Explain your answer.
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ANSWERS
First, the degree of operating leverage (DOL) measures how much a $1 increase in revenue affects the company's operating income. DOL is measured by
Contribution margin ...
Solution Summary
The solution examines if the profits are larger is smaller if firm increased operating leverages.
... Economies of scale means that smaller firms will have ... quantity discounts while buying inputs in large quantities. ... of expansion on weekly profit, economies of ...
... a. Small number of individuals ... False ROA = Profit Margin X Asset Turnover An increase in profit margin will increase... b. the investment with large cash flow late ...
... produced and sold each year; profits total $ 500,000 ... 6,650,000- 1,750,000=4,900,000/ 2,400,000=2.04 profit before interest ... In the large firm ownership stakes may ...
... t change (only their shares changes), the firm's profit doesn't ... By increasing fixed costs, a small change in sales revenue is magnified into a larger change in ...
... of changes in sales volume on both firms' profits. ... so as variable expenses get larger, the fixed ... expenses=$2,000,000-$1,500=$1,998,500 Net profit=EBIT-taxes ...
... funds transfer allow firms to carry smaller cash balances. ... are A. easily capable of surviving large changes in ... off lower levels of risk for higher profits. ...
... contribution margin of $20 to our unit profit of about ...increases by 5 percent, then our division's profits incrase by ... a very small chance of a larger drop, to ...
... a. Current ratio b. Gross profit margin c. Quick ratio d ... d. Maximizing profits gives too much weight to the tax ... b. is generally larger than the future sum. ...
