Chapter 5. Operating and Financial Leverage. Chapter 5 - Outline . What is Leverage? Break-Even (BE) Point Operating Leverage Financial Leverage Leverage Means Risk Combined or Total Leverage. What is Leverage?.
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Operating and FinancialLeverage
Break-even chart:Leveraged firm
Break-even chart:Conservative firm
Volume-cost-profit analysis:Leveraged firm
Volume-cost-profit analysis:Conservative firm
DOL = Q(P-VC) / (Q(P-VC) –FC)
Operating income orloss
Financing plans andearnings per share
Impact of financingplan on earningsper share
Assets Liabilities and Net Worth
Operating leverage Financial leverage
= (S-TVC) /( S-TVC –FC- I)
DCL or DTL = DOL x DFL
Operating andfinancial leverage