FIN 305 Study Guide - Final Guide: Nsb Class 69, Operating Leverage, Capital Structure
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The Harding Company manufactures skates. The company's income statement for 2010 is as follows: |
HARDING COMPANY | ||
Income Statement | ||
For the Year Ended December 31, 2010 | ||
Sales (11,200 skates @ $74 each) | $ | 828,800 |
Less: Variable costs (11,200 skates at $32) | 358,400 | |
Fixed costs | 270,000 | |
Earnings before interest and taxes (EBIT) | 200,400 | |
Interest expense | 66,000 | |
Earnings before taxes (EBT) | 134,400 | |
Income tax expense (40%) | 53,760 | |
Earnings after taxes (EAT) | $ | 80,640 |
(a) | Compute the degree of operating leverage. (Enter only numeric value rounded to 2 decimal places.) |
Degree of operating leverage |
(b) | Compute the degree of financial leverage. (Enter only numeric value rounded to 2 decimal places.) |
Degree of financial leverage |
(c) | Compute the degree of combined leverage. (Enter only numeric value rounded to 2 decimal places.) |
Degree of combined leverage |
(d) | Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.) |
Break-even point | skates |