Operating and Financial Leverage参考.pptVIP

Operating and Financial Leverage 5 Chapter Outline What is leverage? Break-even analysis Operating leverage Financial leverage Combined leverage Potential profits or increased risk? What is Leverage? Use of special forces and effects to magnify or produce more than the normal results from a given course of action Can produce beneficial results in favorable conditions Can produce highly negative results in unfavorable conditions Leverage in a Business Determining type of fixed operational costs Plant and equipment Eliminates labor in production of inventory Expensive labor Lessens opportunity