Assume that the organization has achieved the following performance indicators:
sales revenue (excluding VAT) – RUB 50,000,000;
variable costs (excluding VAT) – RUB 6,000,000;
fixed production costs (excluding VAT) – RUB 25,000,000;
capital structure: equity usages of car owner database capital – 200,000,000 rubles, borrowed capital – 90,000,000 rubles.
The weighted average rate on borrowed capital is 10% per annum.
Based on this data, we calculate the operating, financial and total leverage:
Operating leverage
DOL = (50,000,000 – 6,000,000) / (50,000,000 – 6,000,000 – 25,000,000) = 44,000,000 / 19,000,000 = 2.3.
Therefore, for every 1% change in revenue, earnings before interest and taxes (EBIT) will change by 2.3%.
Financial leverage
DFL = 19,000,000 / 19,000,000 – 0.10 * 90,000,000 = 19,000,000 / 10,000,000 = 1.9.
It turns out that if EBIT changes by 1%, net profit will change by 1.9%.
Total leverage
DTL = 2.3 * 1.9 = 4.4.
Therefore, after a 1% change in revenue, net profit will change by 4.4%.
To reduce your overall risk, you can use one of the following strategies:
high leverage with low operating leverage;
low level of debt with high production volumes;
average values for both levers.
The third method is the most effective. However, it is not so easy to achieve such results.
How to achieve multiple growth in traffic and sales from your website?
Alexey Boyarkin
Dmitry Svistunov
Head of SEO and Development
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I have always been concerned about the issue of moving to a fundamentally new level. So that the indicators would grow not by 2 or 3 times, but by several orders of magnitude. From a thousand visits to ten thousand or from ten thousand to a hundred thousand, if we are talking about a website, for example.
And I know that such leaps are always the result of painstaking work in five areas:
Technical condition of the site.
SEO.
Collection of site semantics.
Creating useful content.
Working on conversion.
And at the same time, every manager needs an increase in sales and the number of applications from the site at the moment.
To get this growth, download our step-by-step template for increasing sales from the site:
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