Talk:Leverage (finance)/Archives/2015

Explain

"A business entity can leverage its revenue by buying fixed assets. This will increase the proportion of fixed, as opposed to variable, costs, meaning that a change in revenue will result in a larger change in operating income.[4][5]"

Ok, this sentence is not making cohesive sense. The first part before the comma means that a business can use its profit form operation to buy (fixed assets) i.e. property, factory, machinery, etc. This will increase the proportion of fixed to variable costs. i.e. fixed costs involve building maintenance and depreciation (which means the wear and tear of the fixed asset - property/plant and machinery), which can be calculated in accounting at a predetermined rate over the life expectancy of the asset. As it may be expected that a specific machine will only be expected to operate for 7 years before it will break down therefore at the 7 year mark its on paper worth will be zero (as it is expected that a new machine will have to be bought at that time) and its original purchase cost would have been deducted from taxes the company pays to the government in the form of depreciation (wear and tear of the asset over its useful life).

Now here is the question how does the third part of the statement relate to the previous part of the sentence "meaning that a change in revenue will result in a larger change in operating income"? It is a true statement i.e. if the revenue of the company (after tax) increases the operating income (i.e. the income of the company before interest and tax) will have to be proportionally larger as it accounts for revenue AND tax. However I don't see a logical link between the first two parts of the sentence and the last part.

Yeah, check out my rewrites under "technical language tag" below. Rainspeaker (talk) 21:49, 2 November 2013 (UTC)

Could someone explain that a little better? 122.107.131.46 (talk) 03:32, 21 April 2012 (UTC)

Dec7 2013

I have done a re-write of all but the calculation section. I simplified by deleting lots that was very esoteric - of next to no value to anyone other than a true officiado. I don't agree with the math calculations, but from experience I would expect the most blow-back for changing them. 24.85.94.77 (talk) 20:15, 7 December 2013 (UTC)

"Leverage" listed at Requested moves

An editor has asked to change the use of Leverage, for the discussion, see talk:Leverage (disambiguation) -- 65.94.43.89 (talk) 21:14, 21 March 2015 (UTC)

Gearing listed at Redirects for discussion

An editor has asked for a discussion to address the redirect Gearing. Please participate in the redirect discussion if you have not already done so. -- 65.94.43.89 (talk) 21:14, 21 March 2015 (UTC)