Below Are Three Relationships That Are Important to the Determination

question 43

Essay

Below are three relationships that are important to the determination of profitability.Assume assets were $22,900,000 on Dec.31,2008.1.Operating leverage = Earnings before interest but after taxes
Average assets.
2.Financial structure leverage = Net income available to common shareholders
Earnings before interest but after taxes
3.ROCE = ROA × Common earnings leverage × Financial structure leverage

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Definitions:

Pure Monopoly

A market structure where a single firm controls the entire market for a product or service, with no close substitutes.

Kinked-Demand Curve

A demand curve that has a distinct bend or "kink" at a certain price level, often used to describe price stability in oligopolistic markets.

Highly Elastic

Refers to a market condition where the demand or supply for a product responds very significantly to changes in its price.

Highly Inelastic

Describes a situation where the quantity demanded or supplied of a good changes by a very small amount in response to changes in price.