Muffins LLC is a leading software solutions company in Oman, established in the year 2003. The company has branches in Dubai, Qatar and Malaysia. The company has received “the Malaysia best employer award” in the year 2020.  Moreover, the company has reported 3% growth in their consolidated income during the first quarter of 2021. However, the internal auditing department of the company has raised concerns about the Business and financial risk of the companies. As a result, the board of directors has instructed Mr. Miras Ahmed to analyse the operating, financial and combined leverages of the company to take necessary steps to minimize the overall risk. Data Extracted from the financial reports of the companies are given below Item Amount / Quantity Sales 200,000 OMR Unit Sold 1000 Nos

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Muffins LLC is a leading software solutions company in Oman, established in the year 2003. The company has branches in Dubai, Qatar and Malaysia. The company has received “the Malaysia best employer award” in the year 2020.  Moreover, the company has reported 3% growth in their consolidated income during the first quarter of 2021. However, the internal auditing department of the company has raised concerns about the Business and financial risk of the companies. As a result, the board of directors has instructed Mr. Miras Ahmed to analyse the operating, financial and combined leverages of the company to take necessary steps to minimize the overall risk.

Data Extracted from the financial reports of the companies are given below

Item

Amount / Quantity

Sales

200,000 OMR

Unit Sold

1000 Nos

Variable cost

70 OMR

Fixed Cost

30,000 OMR

Interest Expenses

10,000 OMR

 

Additional Information

The corporate tax applicable for the previous assessment year was 30%. The fixed interest payments given is for the bank loan of  250,000  OMR taken at an interest rate of 4% per annum.

Question

Calculate Financial Leverage from the above given data?


 

a.

1.8

b.

2.2

c.

1.1

d.
none of these
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