Glen Mount Furniture Company Essay

banter Questions1. Such analysis al emits the firm to determine at what take aim of executions it allow break even up and to explore the relationship between volume, costs, and profits.2. A utility is in a stable, predictable industry and on that pointfore preserve grant to use more fiscal supplement than an automobile comp whatsoever, which is generally subject to the influences of the job cycle. An automobile manufacturer may not be able to service a large amount of debt when there is a haveturn in the economy.3. A labor-intensive company will subscribe low persistent costs and a correspondingly low break-even point. However, the impact of run supplement on the firm is small and there will be little elaboration of profits as volume increases. A capital-intensive firm, on the other hand, will have a high break-even point and jollify the positive influences of operating(a) leverage as volume increases.4. For break-even analysis based on score flows, amortization is considered part of fixed costs. For cash flow purposes, it is eliminated from fixed costs.The accounting flows perspective is longer-term in nature because we must(prenominal) consider the problems of equipment replacement.5. Both operating and financial leverage imply that the firm will employ a heavy dowery of fixed cost resources. This is inherently angry because the obligation to make payments remains no matter of the condition of the company or the economy.6. Debt can unless be used up to a point. Beyond that, financial leverage tends to increase the boilersuit costs of backing to the firm as well asencourage creditors to place restrictions on the firm. The limitations of using financial leverage tend to be greatest in industries that are exceedingly cyclical in nature.7. The higher the amuse rate on new debt, the slight attractive financial leverage is to the firm.8. operating(a) leverage primarily affects the operating income of the firm. At this point, financi al leverage takes over and determines the overall impact on payment per share. A delineation of the combined effect of operating and financial leverage is presented in tabulate 5-6 and Figure 5-5.9. At progressively higher levels of operation than the break-even point, the percentage deepen in operating income as a endpoint of a percentage change in unit volume diminishes. The reason is primarily mathematical as we move to increasingly higher levels of operating income, the percentage change from the higher base is likely to be less.10. The starting level of sales is portentous because we measure what can happen at that point. Note that in formula 5-3, we must specify the quantity or line point at which degree of operating leverage is being computed.11. Financial leverage, or the use of debt, not only determines how untold take we must pay just now also the number of shares of common shopworn that we must issue to support the nondebt assign of our capital structure. Only by examining pelf per share can we pick up the effect of fall outstanding shares on the operation of the firm.12. The quietude point only measures indifference based on earnings per share. Since our net goal is market value maximization, we must also be concerned with how these earnings are valued. Two plans that have the equal earnings per share may tender for different price-earnings ratios, particularly when there is a differential risk component entangled because of debt.13. Television broadcasters commit to production schedules, course purchases, etc., in the spring, create the fall/ overwinter program schedule, and then send the salespeople out to sell advertising air period for the coming season. Thus, the costs are near 100% locked in before any revenues are generated. A minor mutation in advertising revenue, therefore, has a study effect on operating earnings.14. Students may come up with many points expenditure discussing. Emphasis should be directed to the grand debt load that required servicing. Consumer demand slowed down affecting cash flows, and increased interest rates at the end of an sparing cycle had the same effect. Coupled with the prodigal prices paid (particularly for Federated Stores) this caused problems. There was only a small margin for error. Discussion may also include Robert Campeaus ego, failure to follow advice, and failure to carry out asset sales at intercommunicate prices. Campeaus gamble was risky besides it was close.