bbvista pp economic and industry analysis


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Unformatted text preview: n. Factors affecting sensitivity of Factors affecting sensitivity of earnings to business cycles Sensitivity of sales of the firm’s product to the business cycles Operating leverage Financial leverage Operating Leverage Operating Leverage A measure of how sensitive operating profit is to a given percentage change in sales. The extent to which fixed costs are part of a company's cost structure The higher the proportion of fixed costs the greater the sensitivity of net operating income to changes in sales Financial Leverage Financial Leverage Total Debt divided by total Shareholders' Equity. The extent to which debt is employed in the company's capital structure. How well the firm utilizes debt to increase ROE Industry performance and the Industry performance and the business cycle Cyclical Industries capital goods and consumer goods see their stock price rise and fall with economic activity Peak Interest sensitive stocks QuickTime ™ and a decompressor are needed to see this picture. Consumer staples Capital goods, Real Estate Trough Financial Stocks Consumer durables, comm...
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