财务管理基础版.ppt

Operating and Financial Leverage 5 Chapter Outline What is leverage? Break-even analysis Operating leverage Financial leverage Combined leverage Potential profits or increased risk? What is Leverage? Use of special forces and effects to magnify or produce more than the normal results from a given course of action Can produce beneficial results in favorable conditions Can produce highly negative results in unfavorable conditions Leverage in a Business Determining type of fixed operational costs Plant and equipment Eliminates labor in production of inventory Expensive labor Lessens opportunity for profit but reduces risk exposure Determining type of fixed financial costs Debt financing Substantial profits but failure to meet contractual obligations can result in bankruptcy Selling equity Reduces potential profits but minimize risk exposure Operating Leverage Extent to which fixed assets and associated fixed costs are utilized in a business Operational costs include: Fixed Variable Semivariable Break-Even Chart: Leveraged Firm Break-Even Analysis The break-even point is at 50,000 units, where the total costs and total revenue lines intersect Units = 50,000 . Total Variable Fixed Costs Total Costs Total Revenue Operating Income Costs (TVC) (FC) (TC) (TR) (loss) (50,000 X $0.80) (50,000 X $2) $40,000 $60,000 $100,000 $100,000 0 Break-Even Analysis (cont’d) The break-even point can also be calculated by: Fixed costs = Fixed costs = FC Contribution margin Price – Variable cost per unit P – VC i.e. $60,000 = $60,000 = 50,000 units $2.00 - $0.80