15.11 The degree of financial leverage concept suggests that when a negative shock
occurs in EBIT, the greater the degree of operating leverage, the greater the
percentage change in EPS.
15.13 The degree of combined leverage is a combination of the degree
Contribution margin is the proportion of revenue (i.e. sales variable costs)
that is contributed toward fixed costs.
Firms in stable industries, where there is a linear relationship between cost,
volume and profit, will find it useful or necessa
Business risk refers to the variability (relative dispersion) in the firms
expected earnings before interest and taxes (EBIT).
Financial risk is a direct result of the firms financing decisions and is reflected
The additional variability
Week 11 workshop questions done in a week, 12 lecture
BE14-2, BE14-9, E14-3
BRIEF EXERCISE 14-2
(a) The three tools of financial statement analysis are horizontal
analysis, vertical analysis, and ratio analysis. Horizontal analysis
evaluates a series of f