\"Both business risk and financial risk would exist with or without operating an
ID: 2781737 • Letter: #
Question
"Both business risk and financial risk would exist with or without operating and/or financial leverage. Leverage just makes them more significant.
Are those statements true or false? Defend your answer.
For Dicks Sporting Goods, do they use either operating leverage or financial leverage or both?
If so, name a few of its sources of operating leverage and also its source of financial leverage.
0
"Both business risk and financial risk would exist with or without operating and/or financial leverage. Leverage just makes them more significant.
Are those statements true or false? Defend your answer.
For Dicks Sporting Goods, do they use either operating leverage or financial leverage or both?
If so, name a few of its sources of operating leverage and also its source of financial leverage.
0
Explanation / Answer
False
Operating leverage is a measure of business risk and financial leverage is the measurement for financial risk. Hence the question of existence of these leverages with out risk is meaningless.
Part - b
A reference income statements of Dicks sports indicate, Selling, general and administrative exp at $ 1,875,643 for 2017 and $ 1,613,075 for 2016. This portion of these expenses is the reason for business risk ( operating leverage) and Interest expenses for the same periods were $ 5856 for 2017 and $ 4012 for year 2016. These interest expenses cause the financial risk ( financial leverage)
Date for Dicks sporting goods company is obtained from
<https://finance.yahoo.com/quote/DKS/financials?p=DKS>
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