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2 years ago

Give an example of financial leverage, define it and explain how financial leverage works

1 answer:

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Example: A company spends $5 million to buy prime real estate on which to build a new manufacturing factory. The land is worth $5 million. This is not financial leverage because the corporation is not using borrowed funds to purchase the land.
If the same corporation spent $2.5 million of its own money and $2.5 million in borrowed funds to purchase the same piece of real estate, the company is utilizing financial leverage.

Define: the utilization of fixed expenditures to increase the expected risk and potential return

Explanation: When purchasing assets, the corporation has three alternatives for financing: stock, debt, and leases. Apart from equity, the remaining choices have fixed costs that are lower than the expected income from the asset.

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Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: S

Y_Kistochka [10]

Answer:

Product cost= $75

Explanation:

Giving the following information:

Variable costs per unit:

Direct materials $17

Direct labor $47

Variable manufacturing overhead $11

Under the variable costing method, the unitary product cost is calculated using the direct material, direct labor, and unitary variable overhead:

Product cost= 17 + 47 + 11= $75

6 0

3 years ago

24. Armin is trying to decide whether to buy a season pass to his college basketball team’s 20 home games this season. The cost

aksik [14]

Answer:

13 Home games

Explanation:

A season pass cost for home games =$175

Individual ticket per game =$14

For season pass to be less than total home game tickets

i.e $175 must be than ($14 X Homegames )

i.e 175 = 14XHG

HG= 175/14=12.5 Approx. 13 games

Total cost of 13 games is ($13X14)=$182. {$175 is less that $182}

Ardim must attend 13 games.

8 0

3 years ago

Zhang Company reported Cost of goods sold of $835,000, beginning Inventory of $37,200 and ending Inventory of $46,300. The avera

Lilit [14]

Answer:

Average inventory= $41,750

Explanation:

Giving the following information:

Beginning Inventory= $37,200

Ending Inventory= $46,300

To calculate the average inventory, we need to use the following formula:

Average inventory= (beginning inventory + ending inventory) / 2

Average inventory= (37,200 + 46,300) / 2

Average inventory= $41,750

6 0

3 years ago

Why are adjusting entries necessary?

qwelly [4]

Answer:

Option A) To record revenues and expenses

Explanation:

The accounting accrual is an accounting method, it means that the company must record the revenues and expenses in the moment that the transactions occur and not when the payment is done.

By this method is always necessary to make adjustment entries to the accounting system if not it's impossible reflect all the transactions occured at this moment.

3 0

3 years ago

Assume the macro islands can produce either 25 fishing boats or 150 jars of guava jelly in one hour. the micro islands can produ

LenKa [72]

Answer:

The correct answer is letter "C": the Macro Islands have a comparative advantage in producing fishing boats, and the Micro Islands have a comparative advantage in producing guava jelly.

Explanation:

Comparative advantage is an advantage an individual, organization or country has to use opportunity costs in their production compared to their competitors. The scenario described above does not imply that the individual, organization or country has an absolute advantage.

In the example proposed:

Comparative advantage of Macro islands in fishing boats = $\frac{25}{150}= 0.17$
Comparative advantage of Micro islands in fishing boats = $\frac{30}{300} = 0.10$

Comparative advantage of Macro islands in jars = $\frac{150}{25} = 6$
Comparative advantage of Micro islands in jars = $\frac{300}{30} = 10$

Thus, the Macro Islands have a comparative advantage in producing fishing boats, and the Micro Islands have a comparative advantage in producing guava jelly.

5 0

3 years ago