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Unit 7: Concept of Leverages

14. Calculate operating leverage. Interest 5,0000; sales 50,000; Variable cost 25,000; Fixed Notes
cost 15,000.
15. AMC Company Ltd. provided the following information and requested you to Calculate
(a) Operating leverage with 4000 and 6000 quantity of sales, (b) operating BEP (Q). Given,
Selling price 300, variable cost 200, Fixed cost 2, 40,000.

Answers: Self Assessment

1. income 2. Fixed

3. Semi-variable or semi-fixed 4. Variable
5. Break-even analysis 6. fixed operating
7. revenues 8. operating

9. fixed 10. debt
11. risks 12. operating
13. fixed 14. very risky
15. linear

7.8 Further Readings

Books Chandra, P., Financial Management - Theory and Practice, New Delhi, Tata McGraw
Hill Publishing Company Ltd., 2002, p. 3.
Dr Pradeep Kumar Sinha, Financial Management, New Delhi, Excel Books, 2009.
Van Horne, J.C. and Wachowicz, Jr, J.M., Fundamentals of Financial Management,
New Delhi, Prentice Hall of India Pvt. Ltd., 1996, p. 2.

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