If an accountant prepares a plan that shows revenue increasing by 10% and profit for the year increasing by 7.5%, what will be the impact on the company's leverage?

Question

Quizplus · Accepted Answer

The plan shows an unfavourable combined leverage because the profit for the year (a measure of the bottom line) increases at a lower rate than revenue (a measure of the top line), indicating that costs are likely increasing at a rate that could be outpacing revenue growth, thus negatively impacting leverage.

If an Accountant Prepares a Plan That Shows Revenue Increasing