[challenge mather]

From the following income statement, calculate:

(a) Degree of financial leverage.
(b) Degree of operating leverage.
(c) Degree of combined leverage.

Income statement
Sales $440,000
TVC 240,000
Fixed cost 96,000
EBIT 104,000
Interest 19,200
EBT 84,800
Taxes @ 35% 29680
Net income 55,120
Shares outstanding 16,000
EPS $3.44

a DOL
EBIT 104,000 104,000
EBIT-I 104,000-19,200 = 84,800= 1.22

b) DOL
Q(P-VC) 440,000-240,000 = 200,0000
Q(P-VC)-F (440,000-240,000)-96,000 200,000-96,000=
440,000
104,000= 423x

c)DCL
Q(P-VC) 440,000-240,000
Q(P-VC-I 440,000-240,000-19200
200,000
180,800 = 1.11

Know I am wondering if I should be using earnings per share for price however I have no quanity so know I am really confused. Can anyonehelp!


EBIT-I

[challengemather]

I think I figure this problem out on my own!
answer

a) Degree of Financial leverage

EBIT 104,000 = 104,000 = 1.22
EBIT-I 104,000-19,200 84,800



b) Degree of Operating Leverage

S-TVC 440,000-240,000 = 200,000 = 1.92
S-TVC-FC-I 440,000-240,000-96,000 104,000



c) Degree of combined leverage

S-TVC 440,000-240,000 = 200,000 = 2.35
S-TVC-FC-I 440,000-240,000-96,000-19,200 84,800