How do operating and financial leverage interact to affect the volatility of a firm's earnings per share?
What will be an ideal response?
Operating leverage causes changes in sales revenues to lead to even greater changes in EBIT. Additionally, changes in
EBIT due to financial leverage translate into larger variations in both earnings per share (EPS) and the net income
available to the common shareholders (NI), if the firm chooses to use financial leverage. It should be no surprise, then,
to find out that combining operating and financial leverage (combined, or total, leverage), causes rather large
variations in earnings per share.
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When introducing a new product, studies show that which of the following change are likely to be made to a firm's sales program:
a. the sales structure. b. the quota system. c. the advertising campaign. d. only a and b. e. all the above.
Which budgeting method entails defining specific promotion goals, determining the necessary tasks, and estimating the costs to determine a promotion budget?
A) percentage-of-sales method B) objective-and-task method C) affordable method D) exponential task method E) competitive-parity method