BUS 320 Study Guide - Midterm Guide: Operating Leverage, Preferred Stock, Capital Asset Pricing Model
6 May 2020
School
Department
Course
Professor
Document Summary
Leverage slide is the use of fixed costs - Operating leverage slide - extent to which fixed assets and associated. Financial leverage slide use of debt in balance sheet. Cash break-even: fixed costs-all cashless fc(depreciation) / (selling price per unit-vc) Financial leverage: when we use more debt as a company, we use more leverage; when earnings are good it maximizes earnings per share in a positive way. Financial leverage impacts earnings per share on the upside and the downside, magnifies the result. Dfl = % change in eps / % change in ebit. Leverage can be a good or bad thing. Controlling assets - matching sales and production. Patterns of financing matching long term assets to long term financing and short term to short term financing. Short term - self liquidating current assets. Long term - permanent current assets, fixed assets. More short term is more aggressive approach bc can"t be sure short term funding is stable.
