Operating Leverage:- The higher the degree of operating leverage, the greater
the potential danger from forecasting risk. That is, if a relatively small
error is made in forecasting sales, it can be magnified into large errors in
cash flow projections. The opposite is true for businesses that are less
leveraged. A business that sells millions of products a year, with each
contributing slightly to paying for fixed costs, is not as dependent on each
individual sale. For
example, convenience stores are significantly less leveraged than high-end car dealerships.
(Price - Variable Cost per
Unit) - Fixed Operating Cost
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