Two Firms Which Have the Same Operating Leverage Must Also

question 96

True/False

Two firms which have the same operating leverage must also have the same ROA,since operating leverage and ROA both measure the effective utilization of assets by the firm.

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Definitions:

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, obsolescence, or age.

Capital Stock

The total amount of physical and financial assets owned by a company or country, excluding liabilities.

Expected Rate Of Profit

The anticipated return on an investment, calculated based on the potential risks and rewards associated with the investment.

Money Invested

Funds allocated for the purpose of generating income or profit through purchases of assets, securities, or other financial instruments.