if werner company's variable expenses are 55% of sales, and at a $400,000 sales level, the degree of operating leverage is 5. if sales increase by $30,000, the new degree of operating leverage will be (rounded):
The new degree of operating leverage will be 3.91.
What is leverage?
Using borrowed money (debt) to finance an asset acquisition in the hope that the income from the new asset or capital gains will exceed the cost of borrowing is called financial leverage.
This concept summarizes the definition of leverage.
Leverage is the amount of debt a company has in its debt equity combination.
A company with more debt than the industry average is considered highly leveraged.
People use leverage when they borrow money to buy assets or with the hope of growing their money in the future.
For example, if you take out a loan to invest in your side business, investing in your side business can help you make more money than if you didn't pursue the business at all.
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