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CA Inter Leverage (Finance) — practice questions

Explore 71 free Leverage (Finance) questions in CA Inter Financial Management. Open each question or exercise to read its content, reference answers and available explanation.

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Leverage (Finance) questions and exercises with answers

Showing questions 1–30 of 71.

Operating leverage mainly reflects the sensitivity of what?Read the answer and worked solution →A drug firm spends billions on research but pennies per pill. It has what?Read the answer and worked solution →DOL is the ratio of the percentage change in what to the percentage change in sales?Read the answer and worked solution →DOL equals total contribution divided by which amount?Read the answer and worked solution →A firm with zero fixed costs has a degree of operating leverage of what?Read the answer and worked solution →Where is the degree of operating leverage at its highest?Read the answer and worked solution →At the exact break-even point, DOL is described as what?Read the answer and worked solution →As sales climb far beyond break-even, DOL gets close to what?Read the answer and worked solution →At equal sales and profit, which firm has the higher DOL?Read the answer and worked solution →A higher contribution margin does what to profits as sales rise?Read the answer and worked solution →If unit variable cost is constant, rising sales make the fixed-to-total cost ratio do what?Read the answer and worked solution →In the operating-financial analogy, debt servicing resembles which cost?Read the answer and worked solution →Outsourcing a service shifts a firm's cost mix in which direction?Read the answer and worked solution →Why is operating leverage hard for outsiders to compute?Read the answer and worked solution →The product of operating leverage and financial leverage is called what?Read the answer and worked solution →Total leverage estimates the percentage change in which item per 1% revenue change?Read the answer and worked solution →In finance, leverage is also known as what?Read the answer and worked solution →Leverage is any technique that involves doing what?Read the answer and worked solution →Financial leverage is named after a lever in which field?Read the answer and worked solution →How do equity owners leverage their investment in a business?Read the answer and worked solution →Leverage magnifies profits when asset returns exceed what?Read the answer and worked solution →A company that borrows too much may face what in a downturn?Read the answer and worked solution →An investor on 50% margin sees the stock fall 20%. What is the loss on equity?Read the answer and worked solution →Compared with unlevered high-risk tech firms, indebted utilities are usually?Read the answer and worked solution →Accounting leverage is total assets divided by what?Read the answer and worked solution →Assets Rs 12 crore, liabilities Rs 8 crore: accounting leverage is?Read the answer and worked solution →An 8% capital requirement equals an accounting leverage limit of?Read the answer and worked solution →A bank must hold 5% capital against assets. Its maximum accounting leverage is?Read the answer and worked solution →Basel I categorized assets into how many risk buckets?Read the answer and worked solution →By 1988 most large multinational banks were held to which standard?Read the answer and worked solution →

Worked practice questions

Operating leverage mainly reflects the sensitivity of what?

  1. Operating income to sales
  2. Cash balance to credit period
  3. Dividends to retained profit
  4. Earnings per share to interest
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Correct answer: A. Operating income to sales

Operating leverage shows how growth in revenue translates into growth in operating income.

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A drug firm spends billions on research but pennies per pill. It has what?

  1. High operating leverage
  2. Low operating leverage
  3. Negative total leverage
  4. Zero financial leverage
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Correct answer: A. High operating leverage

Very large fixed development cost against tiny incremental production cost is the pattern of high operating leverage.

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DOL is the ratio of the percentage change in what to the percentage change in sales?

  1. Earnings per share
  2. Operating income
  3. Net sales price
  4. Total assets
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Correct answer: B. Operating income

Degree of operating leverage compares the relative change in operating income with the relative change in sales.

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