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Financial analysis_Mod 4 Discussion 1

Financial analysis_Mod 4 Discussion 1

Q 2. What factors would cause a difference in the use of financial leverage for a utility company and an automobile company?

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For a utility company and an automobile company, for both the cases, the final product is largely different. One is dealing with manufacturing of the automobiles and the other one is concerned with the production of power. The demand of power will stay more or less same (although in the long term, it will increase, but that increment will be eventual), but automobile industry can fluctuate highly. As a result, the leverage may be higher in case of automobile industry. 3. Explain how the break-even point and operating leverage are affected