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Catrina Soft Drinks, Inc., sells 500,000 bottles of soft drinks a year. Each bottle produced has a variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000. The company has current interest charges of P6,000 and preferred dividends of P2,400. The corporate tax rate is 40 percent. Calculate the degree of operating leverage, the degree of financial leverage, and the degree of total leverage. (choose the letter of the correct answer) a. Operating – 0.5, financial – 0.25 , total 1.0 b. Operating – 1.0, financial – 0.75 , total 1.75 c. Operating – 1.5, financial – 1.0 , total 2.5 d. Operating – 1.5, financial – 0.25 , total 1.0 e. Operating – 2.0, financial – 1.25 , total – 2.5

Catrina Soft Drinks, Inc., sells 500,000 bottles of soft drinks a year. Each bottle produced has a variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000. The company has current interest charges of P6,000 and preferred dividends of P2,400. The corporate tax rate is 40 percent. Calculate the degree of operating leverage, the degree of financial leverage, and the degree of total leverage. (choose the letter of the correct answer) a. Operating – 0.5, financial – 0.25 , total 1.0 b. Operating – 1.0, financial – 0.75 , total 1.75 c. Operating – 1.5, financial – 1.0 , total 2.5 d. Operating – 1.5, financial – 0.25 , total 1.0 e. Operating – 2.0, financial – 1.25 , total – 2.5

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Catrina Soft Drinks, Inc., sells 500,000 bottles of soft drinks a year. Each bottle produced has a variable cost of P0.25 and sells for P0.45. Fixed operating costs are P50,000. The company has current interest charges of P6,000 and preferred dividends of P2,400. The corporate tax rate is 40 percent.

Calculate the degree of operating leverage, the degree of financial leverage, and the degree of total leverage.

(choose the letter of the correct answer)
a. Operating – 0.5, financial – 0.25 , total 1.0
b. Operating – 1.0, financial – 0.75 , total 1.75
c. Operating – 1.5, financial – 1.0 , total 2.5
d. Operating – 1.5, financial – 0.25 , total 1.0
e. Operating – 2.0, financial – 1.25 , total – 2.5

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