1. If ABC company achieves its projections, what will be its degree of operating leverage? The following information relates to financial projections of ABC's company:Projected sales60,000 unitsProjected variable costs2.00 per unitProjected fixed costs30,000 per yearProjected unit sales price7.00Tax rate25%

Contribution margin = (sales price - variable costs) x no. of units = (7-2)*60000 = P300000

Answered: The following information relates to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Similar questions

Everything else equal, an industry with more leverage will have a: higher return on assets. higher return on equity. lower return on equity. Both A & B
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Which of the following factor is NOT related to increasing an MNC's cost of capital? A. Risk-free interest rate B. Exchange rate C. Size of the MNC D. Country risk
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Which would you expect to be more stable over time, a firm’s book-value or marketvaluecapital structure? Explain.
(b) Why might the usefulness of EPS (earning per share) be limited? Give reasons to support your answer.
Suppose a firm wants to maintain a specific TIE ratio. It knows the amount of its debt, the interest rate on that debt, the applicable tax rate, and its operating costs. With this information, the firm can calculate the amount of sales required to achieve its target TIE ratio. a. True b. False
(1) Why do analysts need to consider different factorswhen evaluating a company’s ability to repay shortterm versus long-term debt? (2) Would the currentamount of the owners’ equity be a reasonable price topay for a company? Why or why not?
MN.1 Which of the following is a potential cost or benefit of positive leverage? A interest tax shield B mitigation of information asymmetry C higher goal congruence D direct and indirect costs of financial distress E. All of the above

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The following information relates to financial projections of ABC's company: Projected sales 60,000 units Projected variable costs 2.00 per unit Projected fixed costs 30,000 per year Projected unit sales price 7.00 Tax rate 25%