Hello, OL doesn't represent profit. It represents degree of change in EBIT due to Sales. Change can be positive or negative. So its not about gain or loss. Coming to relationship of OL with fixed cost. Fixed cost has a huge impact on degree of change of Ebit which sir showed numerically in Class 1.Read more
Hello,
OL doesn’t represent profit. It represents degree of change in EBIT due to Sales. Change can be positive or negative. So its not about gain or loss.
Coming to relationship of OL with fixed cost. Fixed cost has a huge impact on degree of change of Ebit which sir showed numerically in Class 1. If fixed cost wasn’t there, Change in sales would be equal to change in Ebit. Sir also derived the formula algebraically in which fixed cost is there.
Yes, with higher quantities of sale, this impact gets less and OL starts coming closer to 1 but as long as fixed cost is there contribution won’t become equal to EBIT.
LEVERAGE FM
Hello, OL doesn't represent profit. It represents degree of change in EBIT due to Sales. Change can be positive or negative. So its not about gain or loss. Coming to relationship of OL with fixed cost. Fixed cost has a huge impact on degree of change of Ebit which sir showed numerically in Class 1.Read more
Hello,
OL doesn’t represent profit. It represents degree of change in EBIT due to Sales. Change can be positive or negative. So its not about gain or loss.
Coming to relationship of OL with fixed cost. Fixed cost has a huge impact on degree of change of Ebit which sir showed numerically in Class 1. If fixed cost wasn’t there, Change in sales would be equal to change in Ebit. Sir also derived the formula algebraically in which fixed cost is there.
Yes, with higher quantities of sale, this impact gets less and OL starts coming closer to 1 but as long as fixed cost is there contribution won’t become equal to EBIT.
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