Operating superleverage mechanism Cover Image

Mechanizm superdźwigni operacyjnej
Operating superleverage mechanism

Author(s): Jarosław Mielcarek
Subject(s): Economy
Published by: Stowarzyszenie Księgowych w Polsce

Summary/Abstract: The article presents a solution to an essential problem of the sensitivity analysis formulated as the following question: What will be the level of the profit growth rate under the influence of a change in all factors, i.e., prices, demand, variable costs and fixed costs? The formula for the operating superleverage, determining the relevant growth rate, includes solely operating leverages, determined by initial conditions, and any factor growth rate of individual factors and takes into account additivity and multiplicativity of the influence of the changes in the levels of factors. The formula for the final level of demand operating leverage has also been defined, and is determined by the operating superleverage, demand growth rate, and the demand operating leverage, profit growth rate for the changes in prices and in variable costs. Subsequently, this formula is determined again by operating leverages and factor growth rates given in the initial conditions. Both formulae make it possible to explain the levels of changes in profit and demand operating leverage for the changes in all factors. To explain why the above changes take place under the changes in all factors, a break-even point has been given for demand growth rates and the condition for a constant profit. The break-even point determines the level of the demand growth rate for given growth rates of the remaining factors for which the operating superleverage is equal to -100% and the profit equals zero. The demand growth rate different from determined by the break-even point explains the level of the operating superleverage, profit and demand operating leverage depending on whether a company reached profit or experienced loss in the initial conditions. The constant profit point determines the level of the demand growth rate for given growth rates of other factors and operating leverages determined by the initial conditions for which the final profit level remains the same in comparison to the initial condition. The demand growth rate different from the constant profit with the given growth rates of the remaining factors explains why the operating superleverage is positive or negative and the profit is lower or higher from its level in the initial conditions.

  • Issue Year: 2006
  • Issue No: 31
  • Page Range: 36-65
  • Page Count: 29
  • Language: Polish