Operating Leverage Is Easier to Control and Manage Than Financial

question 44

True/False

Operating leverage is easier to control and manage than financial leverage because operating leverage deals with the internal workings of the company while financing deals with outside parties.

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Definitions:

Residual Distribution Policy

A dividend payment policy in which dividends are based on earnings minus all planned capital investments and working capital needs.

Capital Budget

The process and plan for determining and allocating financial resources for major investments or projects within a company.

Payout Ratio

The proportion of earnings paid out as dividends to shareholders, often expressed as a percentage.

Dividend Policies

The policies and guidelines a company follows in deciding how much of its earnings it will pay out to shareholders as dividends.