Please solve this financial accounting question Greenfield Enterprises' operating leverage is 3.5. If thecompany's sales increase by 12.5%, its net operating incomeshould increase by about:a. 12.5%b. 3.5%c. 43.75%d. 37.50%

Step 1: Identify the given values:• Operating Leverage• Percentage Increase in SalesStep 2: Write…

Answered: Greenfield Enterprises' operating…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 23MC: If a firm has a contribution margin of $78M90 and a net income of $13,700 for the current month,...

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If financial leverage of a firm is 4, Interest 6,00,000, Operating Leverage is 3, Variable cost to sales is 66.66%, Income tax rate is 30%, Number of Equity Shares 1, 00, 000. Calculate fixed cost and EPS of the firms. (For your reference, OL = Contribution/EBIT; FL = EBIT/EBT and CL = OL*FL)
· What does a degree of financial leverage (DFL) of 2.0 indicate? O For every 1 percent change in its EBIT, the firm's EPS will change by 2 percent. O For every 1 percent change in its EBIT, the firm's sales will change by 2 percent. For every 1 percent change in its sales, the firm's EBIT will change by 2 percent. For every 1 percent change in its EPS, the firm's EBIT will change by 0.5 percent. ○ For every 1 percent change in its EPS, the firm's sales will change by 0.5 percent.
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Greenfield Enterprises' operating leverage is 3.5. If the company's sales increase by 12.5%, its net operating income should increase by about: a. 12.5% b. 3.5% c. 43.75% d. 37.50%