Sales $2,500,000 Variable Costs 900,000 Fixed Operating Costs 700,000 EBIT 900,000 Interest Expense 200,000 EBT 700,000 Taxes (30%) 210,000 Net Income $490,000 Earnings Per Share $4.90 If ACME's sales next year increase by 20%, ACME's EBIT will increase A. 20%, showing no financial leverage. B. over 35%, due to operating leverage. C. 20%, showing no operating leverage. D. over 35%, due to operating leverage and financial leverage.
Sales $2,500,000 Variable Costs 900,000 Fixed Operating Costs 700,000 EBIT 900,000 Interest Expense 200,000 EBT 700,000 Taxes (30%) 210,000 Net Income $490,000 Earnings Per Share $4.90 If ACME's sales next year increase by 20%, ACME's EBIT will increase A. 20%, showing no financial leverage. B. over 35%, due to operating leverage. C. 20%, showing no operating leverage. D. over 35%, due to operating leverage and financial leverage.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
ACME, Inc. reported the following income statement for 2009:
|
Sales |
$2,500,000 |
|
Variable Costs |
900,000 |
|
Fixed Operating Costs |
700,000 |
|
EBIT |
900,000 |
|
Interest Expense |
200,000 |
|
EBT |
700,000 |
|
Taxes (30%) |
210,000 |
|
Net Income |
$490,000 |
|
Earnings Per Share |
$4.90 |
If ACME's sales next year increase by 20%, ACME's EBIT will increase
| A. |
20%, showing no financial leverage. |
|
| B. |
over 35%, due to operating leverage. |
|
| C. |
20%, showing no operating leverage. |
|
| D. |
over 35%, due to operating leverage and financial leverage. |
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