Maverick Technologies has sales of $3,000,000. The company’s fixed operating costs total $500,000 and its variable costs equal 60% of sales, so the company’s current operating income is $700,000. The company’s interest expense is $492,284. What is the company’s degree of financial leverage (DFL)?

Maverick Technologies has sales of $3,000,000. The company’s fixed operating costs total $500,000 and its variable costs equal 60% of sales, so the company’s current operating income is $700,000. The company’s interest expense is $492,284. What is the company’s degree of financial leverage (DFL)?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 22MC: If a firm has a contribution margin of $59,690 and a net income of $12,700 for the current month,...

See similar textbooks

Similar questions

A company has an operating leverage factor of 4. When its sales increase to P500,000, its profit before tax increased by 100%, Its variable cost ratio is 40%. How much is the company’s fixed cost?
Singh Co. reports a contribution margin of $960,000 and fixed costs of $720,000. (1) Compute the company’s degree of operating leverage. (2) If sales increase by 15%, what amount of income will Singh Co. expect?
What is NUBD’s degree of operating leverage?
Cobalt Industries had sales of 148,100 units at a price of $9.08 per unit. It faced fixed operating costs of $240,000 and variable operating costs of $4.56 per unit. The company is subject to a tax rate of 38% and has a weighted average cost of capital of 8.7%. Calculate Cobalt's net operating profits after taxes (NOPAT), and use it to estimate the value of the firm. (Assume the firm's earnings are not growing.) Cobalt's NOPAT is $ (Round to the nearest dollar.) (...
The CFO of Jupiter Jibs (JJ) expects this year’s sales to be $2.5 million. EBIT is expected to be $1 million. The CFO knows that if sales actually turn out to be $2.3 million, JJ’s EBIT will be $880,000. What is JJ’s degree of operating leverage (DOL)?
At a base sales level of R400,000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. What is the firm's degree of total leverage.
(Using degree of operating leverage) Last year Baker-Huggy Inc. had fixed costs of $150,000 and net operating income of $34,000. If sales increase by 18 percent, by how much will the firm's NOI increase? What would happen to the firm's NOI if sales decreased by 21 percent? If sales increase by 18%, the change in the firms NOI will be (a decrease or increase) of _ %
What is locals net profit margin?
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 1.0b. Operating – 1.0, financial – 0.75 , total 1.75c. Operating – 1.5, financial – 1.0 , total 2.5d. Operating – 1.5, financial – 0.25 , total 1.0e. Operating – 2.0, financial – 1.25 , total – 2.5
1. If ABC company achieves its projections, what will be its degree of operating leverage?
A firm has total assets of $1,000,000 and a debt ratio of 30 percent. Currently, it has sales of $2,500,000, total fixed costs of $1,000,000, and EBIT of $50,000. If the firm's before-tax cost of debt is 10 percent and the firm's tax rate is 40 percent, what is the firm's ROE?
Help