COMP XM PRODUCTION CAPACITY AND
OPERATIONS ASSESSMENT SCRIPT 2026
◉ The industry best practice is for leverage to be in the range of
Answer: 1.8 to 2.8.
1.8 breakdown: 56% equity, 44% debt
2.8 breakdown: 36% equity, 64% debt
◉ what's included in the contribution margin (4)
Answer: sales - labor exp - material exp - inv carry costs =
contribution margin
◉ Name the four ways you can increase your contribution margin
Answer: Reduce cost of materials
Lower MTBF
Increase the product price
Increase automation
,◉ A profitable product should not have more than about X% of their
sales consumed by inventory carrying costs (about X months of
inventory).
Answer: 3%
3 months
◉ the higher the number for asset turnover
Answer: the more efficiently the company is using its assets
*should be greater than 1*
◉ if a company has high leverage, what does it negatively affect?
Answer: interest
◉ If a company has too much capacity, which expense category on
the income statement does this directly affect?
Answer: depreciation
◉ current ratio def
Answer: The current ratio is used to give an idea of the company's
ability to pay back its current liabilities (current debt and accounts
payable) with short-term assets (cash, accounts receivable and
inventory).
, The higher the current ratio, the more capable the company is of
paying its short term obligations.
◉ current ratio formula
Answer: current assets / current liabilities
◉ a current ratio under one suggests
Answer: that the company would be unable to pay off its short term
obligations if they came due at that point.
◉ how to calculate contribution margin
Answer: %: (price - cost) / price
$ amount: calculated by subtracting variable costs from the sales
◉ types of variable costs
Answer: cost of goods sold or labor, material and inventory carrying
costs.
◉ How is the dividend yield on a stock calculated?
Answer: Dividend/share price
OPERATIONS ASSESSMENT SCRIPT 2026
◉ The industry best practice is for leverage to be in the range of
Answer: 1.8 to 2.8.
1.8 breakdown: 56% equity, 44% debt
2.8 breakdown: 36% equity, 64% debt
◉ what's included in the contribution margin (4)
Answer: sales - labor exp - material exp - inv carry costs =
contribution margin
◉ Name the four ways you can increase your contribution margin
Answer: Reduce cost of materials
Lower MTBF
Increase the product price
Increase automation
,◉ A profitable product should not have more than about X% of their
sales consumed by inventory carrying costs (about X months of
inventory).
Answer: 3%
3 months
◉ the higher the number for asset turnover
Answer: the more efficiently the company is using its assets
*should be greater than 1*
◉ if a company has high leverage, what does it negatively affect?
Answer: interest
◉ If a company has too much capacity, which expense category on
the income statement does this directly affect?
Answer: depreciation
◉ current ratio def
Answer: The current ratio is used to give an idea of the company's
ability to pay back its current liabilities (current debt and accounts
payable) with short-term assets (cash, accounts receivable and
inventory).
, The higher the current ratio, the more capable the company is of
paying its short term obligations.
◉ current ratio formula
Answer: current assets / current liabilities
◉ a current ratio under one suggests
Answer: that the company would be unable to pay off its short term
obligations if they came due at that point.
◉ how to calculate contribution margin
Answer: %: (price - cost) / price
$ amount: calculated by subtracting variable costs from the sales
◉ types of variable costs
Answer: cost of goods sold or labor, material and inventory carrying
costs.
◉ How is the dividend yield on a stock calculated?
Answer: Dividend/share price
