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March 2024 (published: 04.03.2024)
Number 1(56)
Home > Issue > Modeling non-zero trust operational leverage
and its potential use in financial administration
Lisitsa M.I.
The subject of the research is the combination of the break-even concept and the tools designed to calculate operating leverage with a non-zero level of reliability, as well as the related ones: a) the normative assessment of sales revenue, which provides zero net profit; b) which is an estimate of fixed costs, the level of a negative financial result with a zero level of sales revenue; c) normative assessment of net profit and normative assessment of sales revenue. At the same time, the purpose of the work is to substantiate the modeling option stated in the topic within the economic activity of the enterprise, which is the object of the study. At its core, the work is based on the following methods: 1) analysis, in particular, of deterministic models that formalize the break-even concept; 2) mathematical statistics and probability theory, in particular, to overcome the uncertain level of confidence in the use of input data within time series, such as: a) the actual estimation of sales revenue for each period of time; b) the actual estimate of the net profit for each period of time. The results of the study can be considered as follows: 1) the conclusion on the practical inconsistency of the orthodox version of the break-even concept in the context of the tools that reveal it; 2) development of a relatively reliable toolkit for identifying: a) operational leverage; b) regulatory assessment of sales revenue, which ensures zero net profit; c) which is an estimate of fixed costs, the level of a negative financial result with a zero level of sales revenue; d) normative assessment of net profit and normative assessment of sales revenue; 3) recommendations in the field of financial administration based on operational leverage. The presented approach may be in demand by commercial organizations aimed at creating or improving their own systems for managing costs, sales revenue and financial results.
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Keywords: operating leverage; financial result; break-even; sales revenue; variable costs; fixed costs.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
UDC 336.67
Modeling non-zero trust operational leverage
and its potential use in financial administration
The subject of the research is the combination of the break-even concept and the tools designed to calculate operating leverage with a non-zero level of reliability, as well as the related ones: a) the normative assessment of sales revenue, which provides zero net profit; b) which is an estimate of fixed costs, the level of a negative financial result with a zero level of sales revenue; c) normative assessment of net profit and normative assessment of sales revenue. At the same time, the purpose of the work is to substantiate the modeling option stated in the topic within the economic activity of the enterprise, which is the object of the study. At its core, the work is based on the following methods: 1) analysis, in particular, of deterministic models that formalize the break-even concept; 2) mathematical statistics and probability theory, in particular, to overcome the uncertain level of confidence in the use of input data within time series, such as: a) the actual estimation of sales revenue for each period of time; b) the actual estimate of the net profit for each period of time. The results of the study can be considered as follows: 1) the conclusion on the practical inconsistency of the orthodox version of the break-even concept in the context of the tools that reveal it; 2) development of a relatively reliable toolkit for identifying: a) operational leverage; b) regulatory assessment of sales revenue, which ensures zero net profit; c) which is an estimate of fixed costs, the level of a negative financial result with a zero level of sales revenue; d) normative assessment of net profit and normative assessment of sales revenue; 3) recommendations in the field of financial administration based on operational leverage. The presented approach may be in demand by commercial organizations aimed at creating or improving their own systems for managing costs, sales revenue and financial results.
Read the full article
Keywords: operating leverage; financial result; break-even; sales revenue; variable costs; fixed costs.
DOI 10.17586/2310-1172-2024-17-1-125-140