Companies often use leverage to augment profits

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Question # 00792691 Posted By: dr.tony Updated on: 02/04/2021 10:20 AM Due on: 02/04/2021

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Companies often use leverage to augment profits. Based on what you learned this week, please explain the following in detail:

With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage. (HINT: The key here is the relation between fixed costs and variable costs.)
What does a business's Contribution Margin represent? What does the Contribution Margin have to do with Operating Leverage?

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score 2 · Accepted Answer · 02/04/2021 10:20 AM

Solution: Companies often use leverage to augment profits

Tutorial # 00791541 Posted By: dr.tony Posted on: 02/04/2021 10:20 AM

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