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Financial Terms | |
operating leverage |
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Definition of operating leverageoperating leverageA relatively small percent increase or decrease in operating leverageDegree to which costs are fixed. Operating leverageFixed operating costs, so-called because they accentuate variations in profits. operating leveragethe proportionate relationship between
Related Terms:degree of operating leveragea factor that indicates how a percentage change in sales, from the existing or current degree of operating leverage (DOL)Percentage change in profits given a 1 percent change in sales. breakeven pointThe annual sales volume level at which total contribution LeverageThe relationship between interest bearing debt and equity in a company(financial leverage) or the effect of fixed expense on after tax earnings(operating leverage). ![]() margin of safetythe excess of the budgeted or actual sales Operating riskThe inherent or fundamental risk of a firm, without regard to financial risk. The risk that is Annual fund operating expensesFor investment companies, the management fee and "other expenses," cash flow from operating activities, or cash flow from profitThis equals the cash inflow from sales during the period minus the cash Cash Flow Provided by Operating ActivitiesWith some exceptions, the cash effects of transactions Debt leverageThe amplification of the return earned on equity when an investment or firm is financed Financial leverageUse of debt to increase the expected return on equity. Financial leverage is measured by financial leverageThe equity (ownership) capital of a business can serve financial leverageDebt financing amplifies the effects of changes in operating income on the returns to stockholders. ![]() Financial leverage clienteleA group of investors who have a preference for investing in firms that adhere to Financial leverage ratiosRelated: capitalization ratios. Highly leveraged transaction (HLT)Bank loan to a highly leveraged firm. Homemade leverageIdea that as long as individuals borrow (or lend) on the same terms as the firm, they can LeverageThe use of debt financing. Leveragehe use of debt financing. Leverage clienteleA group of shareholders who, because of their personal leverage, seek to invest in Leverage ratiosMeasures of the relative contribution of stockholders and creditors, and of the firm's ability Leverage rebalancingMaking transactions to adjust (rebalance) a firm's leverage ratio back to its target. Leveraged betaThe beta of a leveraged required return; that is, the beta as adjusted for the degree of Leveraged buyoutThe purchase of one business entity by another, largely using borrowed ![]() Leveraged buyout (LBO)A transaction used for taking a public corporation private financed through the use leveraged buyout (LBO)Acquisition of the firm by a private group using substantial borrowed funds. Leveraged equityStock in a firm that relies on financial leverage. Holders of leveraged equity face the Leveraged leaseA lease arrangement under which the lessor borrows a large proportion of the funds needed Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Leveraged portfolioA portfolio that includes risky assets purchased with funds borrowed. Leveraged required returnThe required return on an investment when the investment is financed partially by debt. Net benefit to leverage factorA linear approximation of a factor, T*, that enables one to operationalize the Net operating lossesLosses that a firm can take advantage of to reduce taxes. Net operating marginThe ratio of net operating income to net sales. operating activitiesIncludes all the sales and expense activities of a business. operating budgeta budget expressed in both units and dollars Operating cash flowEarnings before depreciation minus taxes. It measures the cash generated from operating cash flowSee cash flow from operating activities. Operating Cash FlowIncome available after the payment of taxes, plus the value of the Operating cycleThe average time intervening between the acquisition of materials or services and the final Operating EarningsA term frequently used to describe earnings after the removal of the Operating expenseAny expense associated with the general, sales, and administrative OPERATING EXPENSESThe total amount that was spent to run a company this year. Operating ExpensesThe amount of money the company must spend on overhead, distribution, taxes, underwriting the risk and servicing the policy. It is a factor in calculating premium rates. Operating exposureDegree to which exchange rate changes, in combination with price changes, will alter a Operating incomeThe net income of a business, less the impact of any financial activity, Operating IncomeA measure of results produced by the core operations of a firm. It is common Operating leaseShort-term, cancelable lease. A type of lease in which the period of contract is less than the Operating leaseThe rental of an asset from a lessor, but not under terms that would Operating LeaseOne where the risks and benefits, as well as ownership, stays with the lessor. Operating Line of CreditA bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year. Operating LoanA loan advanced under an operating line of credit. Operating profitThe profit made by the business for an accounting period, equal to gross profit less selling, finance, administration etc. expenses, but before deducting interest or taxation. operating profitSee earnings before interest and income tax (EBIT). Operating profit marginThe ratio of operating margin to net sales. operating risk (business risk)Risk in firm’s operating income. Short-run operating activitiesEvents and decisions concerning the short-term finance of a firm, such as Unleveraged betaThe beta of an unleveraged required return (i.e. no debt) on an investment when the Unleveraged required returnThe required return on an investment when the investment is financed entirely return on assets (ROA)Although there is no single uniform practice for Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |