wat are the factors of difference between operating leverage and financial leverage. how can both the leverage can be measured?
 

Paramjeet_1988

Par 100 posts (V.I.P)
Re: leverages

Operating leverage measures the difference in the income if the amount of output or sale is changed by one unit and financial leverage is the amount of change in returns if there is a change in the funds that had been borrowed to form the assets. Operating leverage can be measured by the change in earning before interest and tax while degree of OL can be measured by the change in earning per share divided by the percentage change in the earning before interest and tax.
 
V

vardhanvishnug

Guest
Re: leverages

Hope this wil make u understand the operating and financial leverage more clearly
 

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gr8rishabh

New member
but our teacher has taught us some thing very different.

DOL : Contribution/EBIT

DFL : EBIT/EBT

is this also correct?
 
Difference can be easily identified by their definition.So, here is the definition of operating leverage and financial leverage.

Meaning and Definition of operating leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income. It is a measure of leverage, and of how risky, or volatile, a company's operating income is.

Meaning and Definition of financial leverage

Financial leverage refers to the use of debt to acquire additional assets. Financial leverage is also known as trading on equity. Below are two examples to illustrate the use of financial leverage, or simply leverage. Mary uses $400,000 of her cash to purchase 40 acres of land with a total cost of $400,000.
 

rosemarry2

MP Guru
wat are the factors of difference between operating leverage and financial leverage. how can both the leverage can be measured?

Hello friend,

Here I am sharing Study on Financial and Operating Leverage, so please download and check it.
 

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