Horizon Tech Inc. has an output level of 90,000 units, with a degree of operating leverage (DOL) of 4.2. The output decreases to 83,500 units. What will be the percentage change in operating cash flow?

Horizon Tech Inc. has an output level of 90,000 units, with a degree of operating leverage (DOL) of 4.2. The output decreases to 83,500 units. What will be the percentage change in operating cash flow?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 1P: Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1...

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Question

What will be the percentage change in operating cash flow for this financial accounting question?

Horizon Tech Inc. has an output level of 90,000 units, with a degree
of operating leverage (DOL) of 4.2. The output decreases to 83,500
units.
What will be the percentage change in operating cash flow?

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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