____________________ Expenses Change in Proportion to the Amount of Business

question 22

Short Answer

____________________ expenses change in proportion to the amount of business a company does.

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Definitions:

Total Leverage

The combination of operating leverage (affecting operating income) and financial leverage (affecting net income), indicating total risk.

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the profits made will be greater than the interest payable.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.

ROCE

Return on Capital Employed; an economic metric that evaluates how effectively a firm uses its capital to generate profits.