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You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost-structure information for this company. All of it pertains to an output level of 10 million units.

(1) Using this information , find the break-even point in units of output for the firm.

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Return on operating assets = 30%

Operating asset turnover = 6 times

Operating assets = $20 million

Degree of opearting = 4.5 times

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(2) Define the term financial leverage. Does the firm use financial leverage if preference shares are present in the capital structure.

(3) Define the term operating leverage. What type of effect occurs when the firm uses opearting leverage ?

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Q: You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product If you have developed the following cost-structure information for this com?
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