Required:1. How many units would the company need to sell to earn a profit before taxes of $10,000?2. If the company achieves its projections, what will be its degree of operating leverage? Folk CompanyThe following information relates to financial projections of Folk Company:Projected sales60,000 units.Projected variable costsProjected fixed costs$2.00 per unit$50,000 per year$7.00Projected unit sales price

Degree of operating leverage (DOL): DOL reflects variable and fixed cost relationship of an…

The following information relates to financial projections of Folk Company: Projected sales Projected variable costs Projected fixed costs 60,000 units $2.00 per unit $50,000 per year $7.00 Projected unit sales price

The following information relates to financial projections of Folk Company: Projected sales Projected variable costs Projected fixed costs 60,000 units $2.00 per unit $50,000 per year $7.00 Projected unit sales price

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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MGL forecasted the following data for 2022 · Projected unit sales is 5,000 at a selling price of P65. · Variable cost ratio is 60% · Operating break-even point in sales is P250,000 · Earnings before taxes and interest is P30,000 · The P100,000 total debt of the firm requires annual payment of interest at 5%. What is the degree of combined leverage?
A company expects sales to increase during the coming year, and it is using the AFN equation to forecast the additional capital that it must raise. Which of the following conditions would cause the AFN to DECREASE? Group of answer choices: The company begins to pay employees weekly rather than monthly. The company decides to take discounts on purchased materials. The company’s profit margin increases. The company learns that it has no excess capacity. The company increases its dividend payout ratio.
Consider the basic setup of the Diamond-Dybvig (1983) model. Specifically, there are three periods, denoted t = 0, 1, 2, a single consumption good, and an illiquid investment opportunity that pays gross return 1 if liquidated at t = 1, or gross return 2.2 if liquidated at t = 2. There are 500 people in the economy, each endowed with 1 unit of the consumption good at t = 0. At t = 1, exactly 200 will randomly realize that they need to consume at t = 1 (the early consumers), the remaining 300 people will need to consume at t = 2 (the late consumers). The utility derived from consumption is 1 − (1/c1) 2 for early consumers, 1−(1/c2) 2 for late consumers, where the subscript denotes the time of consumption. Suppose a bank can offer an asset that is more liquid, with gross returns Rd 1 = 1.33 and Rd 2 = 1.71 (depending on the time of liquidation). (i) Calculate the bank’s profit after t = 2. In other words, what amount of funds remains at the bank once all depositors have withdrawn? Now…
Calculate the company's asset beta, if the firm's equity beta is 1.6, the debt equity ratio is 0.6 and the marginal tax rate is 30%. Select a O O 1.1268 2.1268 O 1.2618 2.216
If a firm has an EV of $820 million and EBITDA of $187 million, what is its EV ratio?
1.) what is the break-even in dollar sales? 2.) what is the margin of safety percentage? 3.) what is the degree of operating leverage ? (Round your answer to 2 decimal places.) 4.) using the degree of operating leverage and without changing anything, calculate the percentage change in net operating income if unit sales increase by 20% ?
A company has generated over the last year, with the sales of all its product lines, an operating profit (EBIT) of € 12,300 and a financial return (ROE) of 20%. They have had financial expenses of € 5,000 with a capital cost of 10%. a) What is their economic profitability (ROA)? b) What type of leverage factor do they have and what should they do to improve ROE for shareholders?
Ohio Steel has a degree of operating leverage of 2.9. The company predicted EBIT of $332,000 and EPS of $5.7 for the year. Actual EBIT were $284,000 and EPS were $2.42. What is the degree of financial leverage? What is the degree of total leverage? What were earnings before taxes (EBIT - Interest)? What was the company's gross profit (sales - variable costs)?
If the firm is in a very competitive, mature industry, what effect will the competitive conditions have on residual income for the firm and others in the industry? Now suppose the firm holds a competitive advantage in its industry, but the advantage is not likely to be sustainable for more than a few years. As the firm’s competitive advantage diminishes, what effect will that have on that firm’s residual income? and If a firm’s residual income for a particular year is positive, does that mean the firm was profitable? Explain. If a firm’s residual income for a particular year is negative, does that mean the firm necessarily reported a loss on the income statement? Explain. What does it mean when a firm’s residual income is zero?
What is the meaning of each financial ratio?
What is the Degree of Financial Leverage?
You are considering a new supplier that you estimate would reduce your costs 0.025, increasing overall EBIT margin the same amount, or 250 basis points. Tax burden 0.79 Interest burden 0.8 Operating margin Asset turnover 2.1 Leverage ratio 1.2 Equity 56 Before the changes are made the firm was intrinsically valued at 45.54 After the changes, what would the new value be assuming the new ROE, growth, and EPS1. The firm pays dividends as 0.61 of EPS. The discount rate is 0.15" O 64.88 O 70.24 62.35 O 67.36 0.08 O 73.13