The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (10,400 skates @ $58 each) $ 603,200 Variable costs (10,400 skates at $24) 249,600 Fixed costs 190,000 Earnings before interest and taxes (EBIT) $ 163,600 Interest expense 62,000 Earnings before taxes (EBT) $ 101,600 Income tax expense (20%) 20,320 Earnings after taxes (EAT) $ 81,280 a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.) b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.) c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.) d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)
The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows: HARDING COMPANY Income Statement For the Year Ended December 31, 20X1 Sales (10,400 skates @ $58 each) $ 603,200 Variable costs (10,400 skates at $24) 249,600 Fixed costs 190,000 Earnings before interest and taxes (EBIT) $ 163,600 Interest expense 62,000 Earnings before taxes (EBT) $ 101,600 Income tax expense (20%) 20,320 Earnings after taxes (EAT) $ 81,280 a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.) b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.) c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.) d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)
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
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The Harding Company manufactures skates. The company’s income statement for 20X1 is as follows:
| HARDING COMPANY | ||
| Income Statement | ||
| For the Year Ended December 31, 20X1 | ||
| Sales (10,400 skates @ $58 each) | $ | 603,200 |
| Variable costs (10,400 skates at $24) | 249,600 | |
| Fixed costs | 190,000 | |
| Earnings before interest and taxes (EBIT) | $ | 163,600 |
| Interest expense | 62,000 | |
| Earnings before taxes (EBT) | $ | 101,600 |
| Income tax expense (20%) | 20,320 | |
| Earnings after taxes (EAT) | $ | 81,280 |
a. Compute the degree of operating leverage. (Round your answer to 2 decimal places.)
b. Compute the degree of financial leverage. (Round your answer to 2 decimal places.)
c. Compute the degree of combined leverage. (Round your answer to 2 decimal places.)
d. Compute the break-even point in units (number of skates). (Round your answer to the nearest whole number.)
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