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Operating leverage, financial leverage, and working capital management

Corporate issuers / corporate finance · Lesson 4 of 4

Lesson 4 of 4

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Lesson 4 of 4 · Corporate issuers / corporate finance

Operating leverage, financial leverage, and working capital management

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Calculate and interpret breakeven quantity and breakeven revenue, and explain the effect of fixed and variable costs on operating risk.
Calculate and interpret degree of operating leverage, degree of financial leverage, and degree of total leverage.
Explain how operating leverage and financial leverage affect variability of operating income, net income, and returns to shareholders.

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Evaluate working capital policies and the management of cash, marketable securities, receivables, inventory, and trade payables.

Calculate and interpret common measures used in working capital analysis, including the operating cycle, cash conversion cycle, and related turnover ratios.

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