ATC $11-1$ Business $$pplications Operating Leverage

SPECIAL NOTE: The case requires the calculation of operating leverage for $2$ companies and a comparison. You are provided revenues and earnings for two vears for each company. But you are not provided fixed and variable cost levels. You can calculate operating leverage by determining the $\%$ change in earnings between the two years and the $\%$ change in revenues. Then divide the $\%$ change in earnings by the $\%$ change in revenues to obtain operating leverage. This is similar to the examples provided on pages $433$ and $434$ in the printed text or page $209$ in the e$-$text.

Description of business for Delta Alilines, Inc.

$\backslash$table$[[$Della Aritlines, lac $-,2019,2018],[$Reverue$,447\mathrm{.}007,444,439],[$operaving euninge,$6,618,5264]]$

Deseription of business for The Home Depot, Ine. Canade and Mrula.

$\backslash$table$[[$The Hom Depot the,$2010,2018],[$Piveritue$,5110\mathrm{.}225,$stol $200],[$Operatugeatringes$,15445,15\mathrm{.}530]]$

Required:

a$.$ Determine which company appears to have the higher operating leverage.

$[$Hint: Operating leverage can be determined based on the change in revenue relative to the change in operating earnings between years.$]$

b$.$ Write a paragraph or two explaining why the company you identified in Requirement a might be expected to have the higher operating leverage.

If revenues for both companies increased by $5$ percent, which company do you think would likely experience the greater percentage increase in operating earnings? Explain your answer.