[Latest News][6]

Affiliate Marketing Guides
Agriculture Business Ideas
Amazon Online Store Tips
Banking & Finance Tips
Blogging & Webmaster Guides
Bulk SMS Short Code Guides
Computer & IT Business Ideas
Education Business Ideas
Entrepreneurship Tips & Freebies
Facebook Autopilot & Tips
Fashion & Decoration Ideas
Financial Calculators
Fiverr Income Guides
Free SMS Text Messages
Google Adsense Tips
Health Business Opportunities
Inspirational Poems & Literature
Insurance & Risk Management
Job Search Tips
Mobile Phone Tips & Business
Motivational Quotes & Tips
Oil & Gas Business Ideas
Online Business Guides
Online Importation Business Guides
Small Scale Business Ideas
Social Media Income Guides
Start-Up Business Ideas
Transportation & Haulage Ideas
Web & Graphic Designing Ideas
Work-At-Home Business Ideas

Distinguish Between Operating Leverage And Financial Leverage

DISTINGUISH BETWEEN OPERATING LEVERAGE AND FINANCIAL LEVERAGE

1. Operating leverage is associated with the investment activities of the company while Financial leverage is associated with financing activities of the company.

2. Operating leverage consists of fixed operating expenses of the company while Financial leverage consists of operating profit of the company.

3. Operating Leverage represents the ability to use fixed operating cost while Financial leverage represents the relationship between EBIT and EPS.

4. Operating leverage can be calculated by OL = C / OP while Financial leverage can be calculated by FL = OP / PBT.

finance
[Post Image Courtesy of Hyena Reality at FreeDigitalPhotos.net]

5. A percentage change in the profits resulting from a percentage change in the sales is referred to as the degree of operating leverage while A percentage change in taxable profit is the result of percentage change in EBIT.

6. Trading on equity is not possible while the company is applying the operating leverage but Trading on equity is possible only when the company uses financial leverage.

7. Operating leverage depends upon fixed cost and variable cost while Financial leverage depends upon the operating profits.

8. Tax rate and interest rate will not affect the operating leverage while Financial leverage will change due to tax rate and interest rate.

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

No comments:

Post a Comment

Do you have any reasonable comments for this post ? Please feel free to drop them below using the comment box. We will moderate and publish them as soon as possible. Cheers !

Start typing and press Enter to search