Whenever the Percentage Change in Earnings Before Interest and Taxes

question 175

True/False

Whenever the percentage change in earnings before interest and taxes resulting from a given percentage change in sales is greater than the percentage change in sales, operating leverage exists.

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Definitions:

General Reserve

Funds set aside by a company from its profits for general unspecified future risks or obligations.

Amortisation of Goodwill

The gradual write-off of the purchased goodwill of a company over time, reflected as a non-cash expense in the income statement.

Associate's Profit

The portion of profits attributable to a company's investment in an associate, typically accounted for using the equity method.

Equity Accounted Balance

A valuation method used in accounting for investments, where the investment is initially recognized at cost and subsequently adjusted for the investor’s share of the investee’s net assets changes, including profits and losses.