1) Companies often use leverage to help augment profits. From your accounting kn
ID: 2642163 • Letter: 1
Question
1) Companies often use leverage to help augment profits. From your accounting knowledge discuss if you think too much leverage is good or bad. What are the benefits and challenges related to implementing an activity based costing system?
2) In looking at CVP - who should do this? The Accountant, Controller, CFO? Or, should they enlist other members of the company? What do you think is a proper mix? Who should 'own' this type of project or better said, who should be the 'lead' on this type of project/analysis?
Explanation / Answer
Leverage is the use of borrowed money to magnify profit. Its arguable to say that too much of it can be bad as the interests would affect the profits, However, there is no hard rule as to how much leverage is bad. Leverage can be a powerful tool when used responsibly.Alot of the companies use leverage to expand, hedge and speculate.
challenges related to implementing an activity based costing system are:
The advantages of ABC are:
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