Sign up now
to enroll in courses, follow best educators, interact with the community and track your progress.
Download
Degree of Operating Leverage and Some Questions (in Hindi)
1,162 plays

More

Heena Malhotra
Believe in Conceptual Learning.

U
Unacademy user
OL FOR ABCD= 7,2,3,0 respectively
sorry mam.. next vedio me mil gya answr.. sorry mene dekha ni ta next lesson..
dono qstns ka answr bta dijiye.. mjhe wrong lag rha h mera vala.. plzz
mam.. iaka answr sahi kya h?
  1. Financial Decisions- Leverage By Heena Malhotra


  2. Analysis of Leverage Types of Leverage (i) Operating Leverage (ii) Financial Leverages (iii) Combined Leverages Business and Financial Risk By Heena Malhotra


  3. Degree of Operating Leverage (DOL) The operating leverage may also be defined as "the firm's ability to use fixed operating cost to magnify the effects of changes in sales on its earnings before interest and taxes." Percentage change in EBIT Percentage change in Sales Degree of Operating Leverage (DOL) or A EBIT EBIT Sales Sales EBIT means changes in EBIT Sales means changes in sales By Heena Malhotra


  4. Operating Leverage and EBIT Infinite/ Undefined Positive Negative Operating at Lower than break-even point Operating at break even point Operating at a Higher Level than break-even point L EBIT -Ve EBIT O EBIT Ve bustive and ege erating ong


  5. Situation 3: When EBIT is Nil contribution fixed cost) Degree of Operating Leverage (DOL) Contributon Undefined By Heena Malhotra


  6. Analysis and Interpretation of operating leverage S. No. Situation Result No operating leverage Higher Break-even point 1 No Fixed Cost 2. Higher Fixed cost 3. Higher than Break-even level Positive operating leverage 4. |Lower than Break-even level |Negative operating leverage By Heena Malhotra


  7. Situation 1: No. Fixed Cost Particulars 20,000 units 30,000 units Sales @ 10 Variable cost @5 EBIT 200,000 1,00,000 1,00,000 3,00,000 1,50,000 1,50,000 By Heena Malhotra


  8. Question A Company produces and sells 10,000 shirts. The selling price per shirt is 500. Variable ost is 200 per shirt and fired operating cost is t 25,00,000 () Calculate operating leverage. (b) If sales are up by 10%, then what is the impact on EBIT? By Heena Malhotra


  9. SOLUTION (a) Statement of Profitability Particulars Sales Revenue (10,000 x 500) Less: Variable Cost (10,000 200) Contribution Less: Fixed Cost 50,00,000 20,00,000 30,00,000 25,00,000 5,00,000 EBIT Contribution 30 lakhs 5 lakhs Operating Leverage- By Heena Malhotra


  10. % Change in EBIT % Change in Sales (b) Operating Leverage (OL) = X/5,00,000 5,00,000/50,00,000 73,00,000 .A EBIT 3,00,000/5,00,000 :8% = By Heena Malhotra


  11. SOLUTION Particulsrs Firms Sales (units) Sales revenue (Units x price) (?) Less: Variable cost | 1,00,000 | (30,000) (80,000) (1,00,000) (2,50,000) 1,60,000 | 2,50,000| 3,50,000 (Units x variable cost per unit) (e) Less: Fixed operating costs (R) EBIT Nil 50,000 1,00,000 (60,000) (40,000) (1,00,000) 10,000 40,000 Current sales (S) Variable costs (VC) Current EBIT DOL = By Heena Malhotra