Question

Bendel Inc. has an operating leverage of 4.8. If the company's sales increase by 13%, its net operating income should increase by about: _____.

Answer 1

Bendel Inc. has an operating leverage of 4.8. If the company's sales increase by 13%, its net operating income should increase by about: 62.4%.

What does it mean if operating income increases?

• An organization's management is creating more revenue while managing expenses, production costs, and overhead, which is why a company generating an increasing amount of operating income is seen favorably.
• Better managerial controls, more effective resource usage, better pricing, and more successful marketing can all increase operating profit. The operational margin can be defined as the ratio of a company's profits from its main business to its total revenues.
• It could be reasonable to say that the only good operating margin is one that is positive and increasing over time because higher operating margins are generally preferable to lower operating margins. One of the most crucial accounting measures of operational efficiency is operating margin, which is universally accepted.

Bendel Inc. has an operating leverage of 4.8. If the company's sales increase by 13%, its net operating income should increase by about:

Degree of operating leverage = % Change in operating income/ % Change in Sales

4.8 = % Change in operating income/ 13

% Change in operating income  = 62.4%

Bendel Inc. has an operating leverage of 4.8. If the company's sales increase by 13%, its net operating income should increase by about: 62.4%.

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