Here is a compilation of problems on operating and financial leverage in a business with its relevant solutions. Problem 1: Given Sales Rs.100 million, Variable cost Rs.40 Million and Fixed Cost Rs.40 Million. Find out the Degree of Operating Leverage. Solution: Problem 1(a): (a) Given Sales Rs.100 million, Variable cost Rs.48 Million and Fixed Cost Rs.30 Million. Find out the [...]
Here is a list of top three problems on leverage and default risk in a business with its relevant solutions. Problem 1: A company needs to deploy Rs.80 million. It may be financed in different combination of D/E, namely: (i) D/E = 0, fully equity financed, (ii) D/E = 2, and (iii) D/E = 3. Two issues the company encountered [...]
This article throws light upon the top three types of leverage. The types are: 1. Financial Leverage 2. Operating Leverage 3. Composite Leverage. Type # 1. Financial Leverage: A firm needs funds so run and manage its activities. The funds are first needed to set up an enterprise and then to implement expansion, diversification and other plans. A decision has [...]