Question

When the company earns more on the assets purchased with the funds then the fixed cost of their use such effect is called?

Answer 1

Answer:

its called profit of the branch .........

Answer 2

Answer:

When the company earns more on assets purchased with  funds than fixed cost of their use such effect is called profit of branch (leverage).

Explanation:

Leverage involves the employment of fixed assets or funds to provide greater returns to equity shareholders. In general, there are 3 types of leverage operating leverage, financial leverage, and combined leverage. Practically, there are three types of costs involved in firm namely, the variable cost, fixed cost, and semi-variable or semi-fixed costs.