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The relationship between operating leverage and financial leverage
Accounting & Finance, 2018AbstractWe model the relationship between operating and financial leverage. When operating leverage is exogenously specified, financial leverage is a monotonically decreasing function of operating leverage. When financial leverage is exogenously specified, operating leverage is initially increasing and subsequently decreasing in financial leverage ...
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Operating leverage, financial leverage, and equity risk
Journal of Banking & Finance, 1983Abstract The analysis investigates the combined leverage effect of a fixed capacity decision (fixed cost) plus debt on the risk of equity returns. It is argued that the traditional DOL-DFL calculation is incorrect. A correct calculation is given, using the fact that the capacity decision is endogenous to the firm's decision process.
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Operating Leverage: A New Dimension
SSRN Electronic Journal, 2013Hitherto, in determining Operating Leverage, it is assumed that selling price does not vary with changing price of goods, thus inherently violating the Law of Demand, where price and quantity are inversely proportional to each other. This paper presents the sensitivity of Operating profits to simultaneous change in selling price and quantity of goods ...
Nirmal Ghorawat, Ronak Shah
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A value premium without operating leverage
Finance Research Letters, 2012Abstract The existing real options literature explains the value premium as a consequence of either operating leverage raising risk in low-demand states or industry-wide investment lowering risk in high-demand states. This paper presents a simple model in which a value premium arises solely from capacity constraints.
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Operating leases, operating leverage, operational inflexibility and sticky costs
Finance Research Letters, 2019Abstract We show that a firm's operating lease expenses are the major driver of measures of a firm's operating leverage, operational inflexibility, and sticky costs. Moreover, we show that these expenses are an important determinant of a firm's asset volatility, and therefore has implications for the pricing of different securities.
Douglas O. Cook +2 more
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A re-examination of the operating leverage-financial leverage tradeoff hypothesis
The Quarterly Review of Economics and Finance, 1994Abstract The “tradeoff” hypothesis states that firms trade off their operating leverage and financial leverage to manage their level of overall risk. The objective of this study is to examine whether firms that exhibit a relatively high degree of apparent tradeoff differ in financial attributes from firms that exhibit a relatively low degree of ...
Michael T. Dugan +2 more
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Distribution Systems and Operating Leverage
Asia-Pacific Journal of Risk and Insurance, 2005This paper presents a model in which firms compete in a Cournot-Nash game. Firms can choose an exclusive agency (EA) or an independent agency (IA) distribution system. Firms can enter and exit the market and switch distribution systems with no cost. The only difference between an EA system and an IA system is the operating leverage or cost structure ...
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Leveraging SDN to streamline metro network operations
IEEE Communications Magazine, 2016The confluence of two recent technological trends - the maturation of ROADM technology and the rise of SDN - has produced the perfect opportunity to streamline carrier metro network operations through the use of automation. This article introduces readers to the carrier metro network and describes the challenges of automating carrier metro network ...
Joshua Reich +5 more
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Operating Leverage and Inflation
The Journal of Portfolio Management, 2022Martin L. Leibowitz, Stanley Kogelman
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Cash Holdings and Operating Leverage
SSRN Electronic Journal, 2016Since the 1980s, U.S. publicly listed firms almost doubled their average cash holdings. In line with a precautionary motive, this process is often associated with an increase in firms' riskiness. In fact, not only sales volatility has increased, but also operating costs volatility has increased by less, so that costs became relatively more fixed over ...
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