Sales $18,000,000
Variable costs 7,000,000
Revenue before fixed costs $11,000,000
Fixed costs 6,000,000
EBIT $ 5,000,000
Interest expense 1,750,000
Earnings before taxes $ 3,250,000
Taxes 1,250,000
Net income $ 2,000,000
Business Homework Solutions
#13721
Leverage Analysis
You are supplied with the following analytical income statement for your firm. It reflects last year's operations. (see attachment in Word)
a. At this level of output, what is the degree of operating leverage?
b. What is the degree of financial leverage?
c. What is the degree of combined leverage?
d. If sales should increase by 15 percent, by what percent would earnings before taxes (and net income) increase?
e. What is your firm's break-even point in sales dollars?
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