Financial Knowledge: Compound Leverage

2011/1/6 11:14:00 44

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Financial Knowledge Compound Leverage Accounting

(1) composite lever

concept

Compound leverage is defined as the cost of fixed production and operation.

fixed

The change of earnings per share of common stock caused by the existence of financial expenses is greater than the leverage effect of changes in production and sales volume.

(two) measurement of composite leverage

The main indicators of composite lever measurement are composite leverage or composite leverage.

The composite leverage coefficient refers to the rate of change per share of the common stock, which is equal to the multiple of the business variable rate.

The formula is:

Composite leverage = common stock earnings per share

change

Rate of change in volume / production volume

Or: composite leverage coefficient = operating leverage coefficient * financial leverage coefficient.

(three) the relationship between compound leverage and enterprise risk

The risk caused by the compound leverage is a compound risk caused by the large fluctuation of EPS per share.

Compound risk directly reflects the overall risk of an enterprise.

When other factors remain unchanged, the greater the composite leverage coefficient, the greater the composite risk; the smaller the composite leverage coefficient, the smaller the composite risk.

By calculating and analyzing the standard deviation and standard deviation of the composite leverage coefficient and the earnings per share, we can reveal the internal relationship between the compound leverage and the compound risk.