0
Is meant when it is said that a company is operating in the black?
Wiki User
∙ 15y ago
In accounting, positive numbers are written in black. Red is for negative numbers--money that the company owes but cannot pay. So, if a company is operating in the black, it means its cash flow is positive and that it can pay its bills.
Wiki User
∙ 15y ago
Add your answer:
Earn +20 pts
What is the meaning of operating leverage describe it?
Operating leverage is the degree to which cost within a company is fixed. Fixed costs are costs that do not vary with sales. For example, the salary of a manager on a contract is fixed; that is regardless of the production level of a company the manager's pay would not change. Another example is rent, regardless of how much items are sold the rent for a store does not change. With this said, a company with a high operating leverage (in other words high fixed cost) have a high risk because it magnifies the effects of profit depending on sales. This could be measured by computing the degree of operating leverage (DOL) which is the percentage change in profit given a 1 percent change in sales.An example from my Finance textbook (Fundamentals of Corporate Finance) shows a nice table that compares a high fixed cost company (high operating leverage) with a high variable cost company (low operating leverage) given different states of sales. So the following table is a replication of that table and not my own.High Fixed Cost (High Operating Leverage)High Variable Cost(Low Operating Leverage)Sales:SlumpNormalBoomSlumpNormalBoomSales130001600019000130001600019000- VC105631300015438109201344015960- FC200020002000156015601560- Dep.450450450450450450= Profit-135501112705501030VC = variable cost; FC = fixed cost; Dep = deprecation; Profit = before taxAs you can see that with a high operating leverage, the changes from a $3000 change in sales is more than the change from a company with a low operating leverage. This could be captured through DOL as well.DOL = (% change in profits) / (% change in sales)Where % change = (New value - old value) / (old value)If we look at the normal to boom situations:For the high fixed cost the percentage change in profits is 102.20% and the percentage change in sales is 18.75% DOL is as followed:DOL = 102.20/ 18.75 = 5.45For the high variable company the percentage change in profits is 87.30% and the percentage change in sales is 18.75% DOL is as followed:DOL = 87.30/ 18.75 = 4.65Thus the higher the DOL the more fixed cost a company has and the more risk it assumes if the sales slump. But it also means that when sales boom, the higher operating leveraged company will profit merrily!
What conditions exist for a company to break even?
When total costs and total revenues are equal, the business organization is said to be breaking even.
What is a tax implication?
Some financial change or alteration in circumstance that requires a change to an individual's (or company's) tax liability would be said to have a "tax implication".
How may considerations of internal control be said to influence corporate governance?
With increased significance placed on the control environment, the focus of internal control has changed from policies and procedures to an overriding philosophy and operating style within the organization.
What is purpose of the company Ebscohost?
EBSCOhost offers thousands of libraries and other institutions for research. It is the world's foremost research database that is said to be of premium quality for its users.
What is meant when it is said that a company is operating 'in the black'?
A positive cash balance is shown in black ink on the accounting books. Negative cash balance is shown in red. Companies are in the black when they are making money.
Why would someone put a dead black cat on doorstep?
Putting a dead black cat on a doorstep could be a superstitious or threatening gesture meant to bring bad luck or harm to the person living in the residence. It could also be part of a ritual or a form of intimidation or harassment. It is important to take this act seriously and report it to the authorities.
Said what he meant and meant what he said?
Cheshire cat in Alice in Wonderland. No, actually Horton in Horton Hatches an Egg. "I meant what I said and I said what I meant; an elephant's faithful one hundred per cent."
Who said you meant what you said and you said what you meant An elephant's loyal one hundred percent?
Horton says: "I meant what I said and I said what I meant... an elephant's faithful-one hundred percent" in the Dr. Suess classic Horton Hatches the Egg.
In what Dr. Seuss book did Horton say I meant what I said and I said what I meant An elephant's faithful 100 percent?
The quote "I meant what I said and I said what I meant. An elephant's faithful, one hundred percent" is from "Horton Hatches the Egg" by Dr. Seuss.
I have a horse. Do you know what color it is Allan said I guess it is not black. Brian said It is either brown or gray. Charlie said I know it is brown?
Do your friends have problems with colour vision?As a horse owner you can tell the difference between black, brown or gray.If this is meant to be a riddle, it's difficult to see the point.
Is the Declaration of Independence a racist document?
you because when it said all men are equal they only meant white men not black people or even woman
When was I Meant Every Word He Said created?
I Meant Every Word He Said was created on 1990-06-25.
When a survivor said he thought the was hearing thunder he meant?
went he meant
When a country is producing at the production possibilities frontier it can be said that the country is operating?
It is operating at full potential.
What is meant to happen this years according to who?
the world is meant to end and scientist said it
What did Steve Biko mean when he said 'Black man you are on your own'?
He meant that they should be more independent and depend on themselves for their freedom and not to take it for granted that someone would lead them to it.
