Corporate Finance #4 Leverage & Break-Even Analysis

Corporate Finance #4 Leverage & Break-Even Analysis

Corporate Finance #4 Leverage & Break-Even Analysis

Learn about leverage and break-even analysis from a certified public accountant (CPA)

Language: english

Note: 4.2/5 (50 notes) 30,247 students

Instructor(s): Robert (Bob) Steele

Last update: 2022-10-27

What you’ll learn

  • Be able to explain the concept of leverage and why it is important
  • Be able to use break even analysis for decision making
  • Explain the concepts of degree of operating leverage, financial leverage, & combined leverage
  • Calculate the break even point
  • Calculate the cash break even point
  • Use nonlinear breakeven analysis

 

Requirements

  • A general understanding of financial concepts

 

Description

In this course we will cover the concepts of leverage and break-even analysis from a corporate finance perspective.

Leverage is a critical component of decision making in corporate finance and is an area of debate as to the optimal amount of leverage. Finding the best level of leverage may allow a business to grow much faster.

We will discuss the concepts of operating leverage, financial leverage, and combined leverage and include practical practice problems related to these critical concepts.

Break-even analysis is a fundamental tool in decision making. Learners will understand the concept of break-even analysis, including the tool of breaking costs up by their behavior, labeling them fixed costs and variable costs. Labeling costs by category of fixed and variable can seem unnatural at first, because we often label costs by function, what the cost is designed to do, like operating expenses and cost of goods sold. Labeling cost by behavior helps us see how the cost changes with relation to increases in production level, a useful concept for projecting into the future.

The course will show how to calculate the break-even point and the cash break-even point. We will also discuss the concept of nonlinear break-even analysis.

This course will include many practice problems, often including downloadable Excel worksheets. Each Excel worksheet will have at least to tabs, one with the answer, one with a preformatted worksheet that learners can populate along with step-by-step instructional videos.

 

Who this course is for

  • Students
  • Business professionals

 

Course content

  • Introduction
    • 505 Leverage Overview
    • 510 Break Even Analysis
    • 515 Degree of Operating Leverage
    • 520 Financial Leverage
    • 525 Combined Leverage
  • Practice Probs – Leverage & Break-Even Analysis
    • OneNote Resource
    • 511 Break Even Analysis
    • 512 Break Even Point & Fixed & Variable Cost
    • 515 Break Even Analysis Projection Plan
    • 517 Cash Break Even Point
    • 520 P1 Degree of Operating Leverage, Degree of Financial Leverage, & Combined Le
    • 520 P2 Degree of Operating Leverage, Degree of Financial Leverage, & Combined Le
    • 521 P1 Second Degree of Operating Leverage, Degree of Financial Leverage, & Comb
    • 521 P2 Second Degree of Operating Leverage, Degree of Financial Leverage, & Co
    • 522 Degree of Leverage Problem 1
    • 523 Degree of Leverage Problem 2
    • 524 Nonlinear Breakeven Analysis
    • 525 Degree of Operating Leverage Alternative Formula
    • 528 Price Earnings Ratio Comparison for Companies with Different Leverage
    • 531 Leverage Ratios & Projected Expansion Scenarios
  • Excel Probs – Leverage & Break-Even Analysis
    • 511 Break Even Analysis
    • 512 Break Even Point & Fixed & Variable Cost
    • 515 Break Even Analysis Projection Plan
    • 517 Cash Break Even Point
    • 520 P1 Degree of Operating Leverage, Degree of Financial Leverage, & Combined Le
    • 520 P2 Degree of Operating Leverage, Degree of Financial Leverage, & Combined Le
    • 521 P1 Second Degree of Operating Leverage, Degree of Financial Leverage, & Comb
    • 521 P2 Second Degree of Operating Leverage, Degree of Financial Leverage, & Comb
    • 522 Degree of Leverage Problem 1
    • 523 Degree of Leverage Problem 2
    • 524 Nonlinear Breakeven Analysis
    • 525 Degree of Operating Leverage Alternative Formula
    • 526 Financial Leverage & Earnings Per Share
    • 527 Using Price to Earnings Ratio PE Ratio to Calculate Market Price
    • 528 Price Earnings Ratio Comparison for Companies with Different Leverage
    • 531 Leverage Ratios & Projected Expansion Scenarios
    • 533 P1 Leverage Analysis Problem 1 Part 1
    • 533 P2 Leverage Analysis Problem 1 Part 2
    • 534 P1 Leverage Analysis Problem 2 Part 1
    • 534 P2 Leverage Analysis Problem 2 Part 2
    • 535 Financing Plans to Increase Assets

 

Corporate Finance #4 Leverage & Break-Even AnalysisCorporate Finance #4 Leverage & Break-Even Analysis

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