### Income Statement for Surfside Airlines **Sales**: $150,000 **Variable Operating Costs**: ($105,000) **Gross Profit**: $45,000 **Fixed Operating Costs**: ($20,000) **Net Operating Income**: $25,000 **Interest**: ($15,000) **Earnings Before Taxes**: $10,000 **Taxes (40%)**: ($4,000) **Net Income**: $6,000 ### Explanation This financial statement provides an overview of Surfside Airlines' income, expenses, and profits. Here’s a breakdown: - **Sales** represent the total revenue generated before any expenses are subtracted. - **Variable Operating Costs** are expenses that fluctuate directly with sales volume. These are subtracted from sales to determine gross profit. - **Gross Profit** is the profit a company makes after deducting the costs associated with making and selling its products or services. - **Fixed Operating Costs** are expenses that do not change with the level of sales. - **Net Operating Income** is the income after all operating expenses are deducted. - **Interest** is deducted to find the earnings before taxes. - **Earnings Before Taxes** (EBT) is the profit that remains after interest costs are deducted. - **Taxes** are calculated as 40% of the earnings before taxes. - **Net Income** is the final profit after all expenses, including taxes and interest, are deducted. ### Task Compute Surfside’s degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage (DTL).

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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12-10

### Income Statement for Surfside Airlines

**Sales**: $150,000

**Variable Operating Costs**: ($105,000)

**Gross Profit**: $45,000

**Fixed Operating Costs**: ($20,000)

**Net Operating Income**: $25,000

**Interest**: ($15,000)

**Earnings Before Taxes**: $10,000

**Taxes (40%)**: ($4,000)

**Net Income**: $6,000

### Explanation

This financial statement provides an overview of Surfside Airlines' income, expenses, and profits. Here’s a breakdown:

- **Sales** represent the total revenue generated before any expenses are subtracted.
- **Variable Operating Costs** are expenses that fluctuate directly with sales volume. These are subtracted from sales to determine gross profit.
- **Gross Profit** is the profit a company makes after deducting the costs associated with making and selling its products or services.
- **Fixed Operating Costs** are expenses that do not change with the level of sales.
- **Net Operating Income** is the income after all operating expenses are deducted.
- **Interest** is deducted to find the earnings before taxes.
- **Earnings Before Taxes** (EBT) is the profit that remains after interest costs are deducted.
- **Taxes** are calculated as 40% of the earnings before taxes.
- **Net Income** is the final profit after all expenses, including taxes and interest, are deducted.

### Task

Compute Surfside’s degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage (DTL).
Transcribed Image Text:### Income Statement for Surfside Airlines **Sales**: $150,000 **Variable Operating Costs**: ($105,000) **Gross Profit**: $45,000 **Fixed Operating Costs**: ($20,000) **Net Operating Income**: $25,000 **Interest**: ($15,000) **Earnings Before Taxes**: $10,000 **Taxes (40%)**: ($4,000) **Net Income**: $6,000 ### Explanation This financial statement provides an overview of Surfside Airlines' income, expenses, and profits. Here’s a breakdown: - **Sales** represent the total revenue generated before any expenses are subtracted. - **Variable Operating Costs** are expenses that fluctuate directly with sales volume. These are subtracted from sales to determine gross profit. - **Gross Profit** is the profit a company makes after deducting the costs associated with making and selling its products or services. - **Fixed Operating Costs** are expenses that do not change with the level of sales. - **Net Operating Income** is the income after all operating expenses are deducted. - **Interest** is deducted to find the earnings before taxes. - **Earnings Before Taxes** (EBT) is the profit that remains after interest costs are deducted. - **Taxes** are calculated as 40% of the earnings before taxes. - **Net Income** is the final profit after all expenses, including taxes and interest, are deducted. ### Task Compute Surfside’s degree of operating leverage (DOL), degree of financial leverage (DFL), and degree of total leverage (DTL).
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