Question

Difference in operating levarage and financial levearge

Answer 1

Answer:

Explanation:

OPERATING LEVERAGE

i)Use of such assets in the company's operations for which it has to pay fixed costs is known as Operating Leverage.

ii)Effect of Fixed operating costs.

iii)Sales and EBIT

iv)Company's Cost Structure

v)It give rise to business risk.

FINANCIAL LEVERAGE

i)Use of debt in a company's capital structure for which it has to pay interest expenses is known as Financial Leverage.

ii)Effect of Interest expenses

iii) EBIT and EPS

iv)Company's Capital Structure

iv)It give rise to financial risk.