Problem 10 (Degree of Leverage) The Sapphire Company income statement for 20X4 is as follows: SAPPHIRE COMPANY Income Statement For the Year Ended December 31, 20X4 P1,200,000 600,000 400,000 200,000 50.000 150,000 45,000 P 105,000 Sales (20,000 units at P60 each) Less: Variable costs (20,000 units at P30) Fixed costs Earnings before intereșt and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (30%) Earnings after taxes (EAT) Given this income statement, compute the following: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage. d. Break-even point in units.
Problem 10 (Degree of Leverage) The Sapphire Company income statement for 20X4 is as follows: SAPPHIRE COMPANY Income Statement For the Year Ended December 31, 20X4 P1,200,000 600,000 400,000 200,000 50.000 150,000 45,000 P 105,000 Sales (20,000 units at P60 each) Less: Variable costs (20,000 units at P30) Fixed costs Earnings before intereșt and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (30%) Earnings after taxes (EAT) Given this income statement, compute the following: a. Degree of operating leverage. b. Degree of financial leverage. c. Degree of combined leverage. d. Break-even point in units.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 10 (Degree of Leverage)
The Sapphire Company income statement for 20X4 is as follows:
SAPPHIRE COMPANY
Income Statement
For the Year Ended December 31, 20X4
P1,200,000
600,000
400,000
200,000
50.000
150,000
45,000
P 105,000
Sales (20,000 units at P60 each)
Less: Variable costs (20,000 units at P30)
Fixed costs
Earnings before intereșt and taxes (EBIT)
Interest expense
Earnings before taxes (EBT)
Income tax expense (30%)
Earnings after taxes (EAT)
Given this income statement, compute the following:
a. Degree of operating leverage.
b. Degree of financial leverage.
c. Degree of combined leverage.
d. Break-even point in units.
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