Explain this statement: “Using leverage has both good and badeffects.”

Q: What is operating leverage, and for what is it used?

A: Operating Leverage is a cost-accounting formula used to measure the growth of its operating income.…

Q: What are the advantages and disadvantages of  FIFO?

A: First-in-First-Out:  In First-in-First-Out method, the costs of the initially purchased items are…

Q: What exactly are ESOPs? What are some of its benefits and drawbacks?

A: Introduction: ESOP: Employee stock ownership plan is retirement plans for employees of the company…

Q: Explain Anti-dilutive Security

A: Explanation to Securities Securities are referred to as the tradeable financial instruments which…

Q: What does this statement mean? One type of leverage affects both EBIT and EPS. The other type…

A: Operating leverage is based on the cost structure of the company. It is the extent of fixed and…

Q: Which would changes in leverage have no effect on FCFE or FCFF, explain your answer

A: Free cash flow to firm(FCFF) is the cash flow available to supplier of capital. Free cash flows to…

Q: What is Operating Leverage and is it good or bad?

A: It can be characterized as how much a firm brings about a mix of fixed and variable expenses. In…

Q: What are some advantages of the Direct Write-Off method? What are some disadvantages of the Direct…

A: Direct Write Off Method: According to Direct Write off method, Bad Debt Expense is recognized once…

Q: Explain the drawbacks of IRR over MIRR with example?

A: Capital budgeting is part of investment decisions. Business firms consider capital budgeting in…

Q: "ABC systems may result in misallocation of indirect costs." Do you agree? Give reasons for your…

A: ABC system means Activity Based Costing system in which all indirect costs or overhead costs are…

Q: What is NUBD’s degree of operating leverage?

A: Degree of operating leverage shows how operating income of the business will change as a, result of…

Q: Cullumber Corp. is considering purchasing one of two new diagnostic machines. Either machine would…

A: NPV ( Net Present Value) is a method that is used to assess an investment's profitability by…

Q: What are the advantages and disadvantages of  LIFO?

A: Last-in-First-Out: In Last-in-First Out method, the costs of last purchased items are considered as…

Q: Explain the effect of leverage on EPS and ROE and what is the break-even EBIT?

A: Leverage refers to the debt amount a company uses in order to finance its assets. EPS refers to…

Q: How do you define leverage?

A: Solution:- Leverage means as follows under:-

Q: What are valid weaknesses of NPO?

A: Not for profit organization have certain weaknesses. some for them are- 1. Limited Purposes In order…

Q: What are the benefits and drawbacks of FIFO?

A: Introduction: First-in-First-Out:  In First-in-First-Out method, the costs of the initially…

Q: HAT ARE THE TYPES OF LEVERAGE? HOW ARE THEY CALCULATED AND WHAT DO THEY IMPLY?

A: Leverage is the technique of risk evaluation in a business. There are three types of Leverage…

Q: How can thepayback method be useful?

A: Meaning:   The payback period is the time required to earn back the amount invested in a…

Q: What is meant by the term operating leverage?

A: Definition: Operating leverage: Operating leverage is an outcome of using fixed costs to obtain a…

Q: What are practical weaknesses of NPO?

A: Organizations are described as business units which are established by the individuals, or group of…

Q: Why is operating leverage important? Provide three reasons

A: Leverage in a simple sense refers to borrowing funds. A company borrows funds to increase its…