Sources of Operating Leverage

1.What are the sources of operating leverage and financial leverage and explain their impact on operating and net income?

2.Mini Case: Your organization (a not for profit group) is considering hiring a professional fund raise to assist in selling raffle tickets. This consultant is going to charge $10,000 (fixed cost) plus 45 cents (variable cost) for every person solicited. It is going to try to get donations of $5 per raffle ticket sold. In this case, break even would be just about 2,200 tickets sold. Your mailing list contains 5,000 names. Your organization must now decide how many tickets it is likely to sell. Remember if it sells less than 2,200 it makes no money. Should it undertake this project? State the assumptions that you made in arriving at your answer and defend your decision. Consider two industries, steel production and donut making. Which industry do you think has the highest degree of operating leverage? Give your answer to the first part, what should the level of financial leverage for each industry? Should both of these industries have similar degrees of combined leverage?

3.High degrees of financial leverage and operating leverage each involve different types of risk. Risk of what?

4.Study Problem #1 ( Leverage analysis) You have developed the following analytical income statment for Hugo boss Corporation. It represents the most recent year’s operations, which ended yesterday. Then redo part d with 10% reduction in variable cost and a $3000 increase in fixed cost.

Sales $50,439,375
Varible Costs ( 25,137,000)
Revenue before Fixed Costs $25,302,375
Fixed Costs (10,143,000)
Ebit $15,159,375
Interest Expense (1,488,375)
Earnings before taxes $13,671,000
Taxes at 50% (6,835,500)
Net Income $6,835,500

Your supervisor in the controller’s office has just handed you a memorandm asking for written responses to the following question:

A. At this level of output, what is the degree of operating leverage?
b. What is the degree of financial leverage?
C. What is the combined leverage?
D. What is the firms’ break-even point in sales dollars?
E. If sales should increase by 30%, by what percent would earnings before taxes(and net income) increase?

My textbook for this course is Keown, Martin, Petty, Scott,JR. Foundations of Finance Fifth Edition

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Sources of Operating Leverage

1.What are the sources of operating leverage and financial leverage and explain their impact on operating and net income?

2.Mini Case: Your organization (a not for profit group) is considering hiring a professional fund raise to assist in selling raffle tickets. This consultant is going to charge $10,000 (fixed cost) plus 45 cents (variable cost) for every person solicited. It is going to try to get donations of $5 per raffle ticket sold. In this case, break even would be just about 2,200 tickets sold. Your mailing list contains 5,000 names. Your organization must now decide how many tickets it is likely to sell. Remember if it sells less than 2,200 it makes no money. Should it undertake this project? State the assumptions that you made in arriving at your answer and defend your decision. Consider two industries, steel production and donut making. Which industry do you think has the highest degree of operating leverage? Give your answer to the first part, what should the level of financial leverage for each industry? Should both of these industries have similar degrees of combined leverage?

3.High degrees of financial leverage and operating leverage each involve different types of risk. Risk of what?

4.Study Problem #1 ( Leverage analysis) You have developed the following analytical income statment for Hugo boss Corporation. It represents the most recent year’s operations, which ended yesterday. Then redo part d with 10% reduction in variable cost and a $3000 increase in fixed cost.

Sales $50,439,375
Varible Costs ( 25,137,000)
Revenue before Fixed Costs $25,302,375
Fixed Costs (10,143,000)
Ebit $15,159,375
Interest Expense (1,488,375)
Earnings before taxes $13,671,000
Taxes at 50% (6,835,500)
Net Income $6,835,500

Your supervisor in the controller’s office has just handed you a memorandm asking for written responses to the following question:

A. At this level of output, what is the degree of operating leverage?
b. What is the degree of financial leverage?
C. What is the combined leverage?
D. What is the firms’ break-even point in sales dollars?
E. If sales should increase by 30%, by what percent would earnings before taxes(and net income) increase?

My textbook for this course is Keown, Martin, Petty, Scott,JR. Foundations of Finance Fifth Edition

Calculate the price
Make an order in advance and get the best price
Pages (550 words)
$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Upload your instructions
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with AssignmentHelpWeb
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Anthropology
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Customer 452443, September 23rd, 2022
Nursing
The paper was EXCELLENT. Thank you
Customer 452449, September 23rd, 2022
English 101
Very good job. I actually got an A
Customer 452443, September 25th, 2022
Architecture, Building and Planning
The assignment was well written and the paper was delivered on time. I really enjoyed your services.
Customer 452441, September 23rd, 2022
Anthropology
Excellent services will definitely come back
Customer 452441, September 23rd, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
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Average paper length
37%
Customers referred by a friend
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