Operating Leverage The degree of operating leverage provides a measure of a company's earnings volatility.
{"Image DocumentName": "Operating LeverageThe degree of operating leverage provides a measure of a company\u2019s earnings volatility.", "Image ImageDescription": "The degree of operating leverage is computed by dividing total contribution margin by net income. The computations for Vargo and New Wave are: New Wave\u2019s earnings would go up (or down) by about two times (5.33 \u00f7 2.67 = 1.99) as much as Vargo\u2019s with an equal increase in sales. 1. On the topic, Challenges Facing Financial Accounting, what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information. Soft Assets (a company\u2019s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) LO 5: Understand how operating leverage affects profitability.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}