Wednesday, March 10, 2010

Is Variability of Returns Related to Accounting Risk?

Accounting Question: Is Variability of Returns Related to Accounting Risk?

Yes. Risk is the overall probability that a business activity will lead to an unfavorable result. The variability of returns is integrally related to this because it concerns the amount of return that a company may get from one of their investments.

For example, Degree of Operating Leverage  is a measure of business risk used by company's on their balance sheets,  Degree of Operating Leverage (DOL) demonstrates a small percentage change in a company's  sales can lead to a significant change on their EBIT or operating income that would not otherwise occur.


Additional Accounting Related Information on Financial Leverage and Variability of Returns:

No comments:

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.