August 2011
Beginner
547 pages
16h 12m
English
Content preview from Fundamentals of Financial Management, Third EditionBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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POINTS TO REMEMBER
- What is leverage? What are its different types?
- Leverage is a profit-raising tool.
- Its types are:
- ROI leverage
- Marginal-analysis leverage, such as operating leverage, fixed- charge leverage and combined leverage
- Financial leverage
- What is ROI leverage?
- ROI leverage = Profit margin x asset turnover. It means that profits can be raised through raising either/both of the two ratios
- What is operating leverage?
- It exists when changes in contribution margin produce greater changes in operating profit. DOL = MC/EBIT
- What is fixed charge leverage?
- It exists when changes in EBIT lead to greater changes in EBT. DFCL = EBIT/EBT
- What is combined leverage?
- It is a product of operating leverage and fixed-charge leverage. ...
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