Please review my online lecture on operating leverage and th

Assignment Help Finance Please review my online lecture on operating leverage and th

Finance

Please review my online lecture on operating leverage and th

Please review my online lecture on operating leverage and the chapter 12 text material on operating… Show more Please review my online lecture on operating leverage and the chapter 12 text material on operating leverage. A company with high operating leverage has a low percentage of variable costs to sales. Assume, for example, that your firm has sales of 1 million dollars and variable costs of 100,000 dollars. The variable costs are only 10 percent of the sales. This is a very high operating leverage situation. High operating leverage companies will see dramatic increases in earnings per share with very small increases in sales. This is because of the operating leverage inherent in their operating structure. When earnings per share rise quickly this drives stock prices up fast too. Given all of the information above, what would happen to stock prices of a high operating leverage company if sales fall slightly? How would this impact EPS and then stock price? • Show less

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