Industry+Analysis+with+Leverage+Slides+Added

Industry+Analysis+with+Leverage+Slides+Added - Risk...

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Fusing the ART, SCIENCE , and TECHNOLOGY of Business. Risk Multipliers: DOL and DFL Degree of Operating Leverage DOL = Degree of Financial Leverage DFL = Degree of Total Leverage DTL = % change in net income  DOL x DFL    % change in Sales % change in EBIT % change in Sales % change in net income     % change in EBIT
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Fusing the ART, SCIENCE , and TECHNOLOGY of Business. Leverage Quiz Revenue 2000 COGS 400 Gross Profit 1600 Operating Expenses 800 Operating Profit 800 Interest Expense 100 Profit Before Taxes 700 Tax (25%) 175 Net Income 525 Degree of Operating leverage = a.Less than 1 b.Between 1 and 1.6 c.Between 1.6 and 2.2 d.Between 2.2 and 2.8 e.More than 2.8 Degree of Financial leverage = a.Less than 1 b.Between 1 and 1.6 c.Between 1.6 and 2.2 d.Between 2.2 and 2.8 e.More than 2.8 Degree of Total leverage = a.Less than 1 b.Between 1 and 1.6 c.Between 1.6 and 2.2 d.Between 2.2 and 2.8 e.More than 2.8
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Fusing the ART, SCIENCE , and TECHNOLOGY of Business. Leverage Quiz Company A and Company B compete in the same industry and in 2007 have virtually identical revenues, cost of goods sold, interest rates, tax rates, and net income. The only significant difference between their balance sheets is that Company A uses much more long term debt to finance itself than does Company B. If we observe that both companies experience a 50% increase in net income in 2008 when they achieve a 10% growth in revenues, we can conclude that a) Co. A’s degree of operating leverage is higher than Co. B’s. b) Co. A’s degree of operating leverage is lower than Co B’s. c) Co. A has lower operating expenses than does Co. B. d) Both a and c are correct. e) Both b and c are correct.
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Fusing the ART, SCIENCE , and TECHNOLOGY of Business. Understanding the Competitive Environment Industry Analysis Professor J. Robb Dixon Based on a lecture by Professor Peter Arnold with some material from Professor Tomas Kohn Professor John Mahon Professor Melissa Schilling
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Fusing the ART, SCIENCE , and TECHNOLOGY of Business. Industry Analysis Competition is the result of firms within an industry taking actions to achieve relatively mutual objectives . Market Share Profitability Customer Loyalty etc. Competition is the engine of innovation . Therefore, its importance is paramount.
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Fusing the ART, SCIENCE , and TECHNOLOGY of Business. Industry Analysis What is an industry? A collection of firms competing in a market defined by the technology of the product or by specific characteristics of the service provided. Key is to note that competitors within a given industry are competing for the same general set of customers.
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Industry+Analysis+with+Leverage+Slides+Added - Risk...

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