🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Accounting
16
answers
0
watching
68
views
27 Nov 2019

Which of the following is not true for a firm with highoperating leverage?

a. It has a relatively high amount of fixed costs.

b. It is generally thought to be riskier than a company withlower operating leverage.

c. It has a larger contribution margin ratio than similarfirms.

d. If sales increase, its profits will increase slower than acompany with lower operating leverage.

Watch
16
answers
0
watching
68
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Get unlimited access
Already have an account? Log in
Share
Reid Wolff
Reid WolffLv2
4 May 2019
Get unlimited access
Already have an account? Log in
Share

Related questions

Companies often use leverage to augment profits. Based on what you learned this week, please explain the following in detail:
With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage. (HINT: The key here is the relation between fixed costs and variable costs.)
What does a business's Contribution Margin represent? What does the Contribution Margin have to do with Operating Leverage?

1) Zehms,Inc. has a contribution margin per unit of $21 and a contributionmargin ratio of 60%. How much is the selling price of eachunit?

A) Cannot be determinedwithout more information

B) $35
C) $52.50
D) $12.60

2)Which ofthe following statements is nottrue?
A.When acompany's sales revenue is increasing, high operating leverage isgood because it means that profits will increaserapidly.
B.When acompany's sales revenue is decreasing, high operating leverage isgood because it means that profits will decrease at a slower pacethan revenues decrease.
C.Operatingleverage refers to the extent to which a company's net incomereacts to a given change in sales.

D. Companies that have higher fixed costs relative to variablecosts have higher operating leverage.

3. WarnerManufacturing reported sales of $2,000,000 last year (100,000 unitsat $20 each), when the break-even point was 75,000 units. Warner'smargin of safety ratio is

A.33%. B.25%.C.75%. D.125%

4. In2012, Raleigh sold 1,000 units at $500 each, and earned net incomeof $50,000. Variable expenses were $300 per unit, and fixedexpenses were $150,000. The same selling price is expected for2013. Raleigh's variable cost per unit will rise by 10% in 2013 dueto increasing material costs, so they are tentatively planning tocut fixed costs by $15,000. How many units must Raleigh sell in2013 to maintain the same income level as 2012?

A.1,088
B.794
C.971
D.1,176






With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage.

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in