The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement...

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The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20XX Sales (25,000 tires at $40 each) Less: Variable costs (25,000 tires at $15) Contribution margin Less: Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (40%) Earnings after taxes (EAT) $ 1,000,000 375,000 625,000 500,000 125,000 75,000 50,000 20,000 $ 30,000 Given this income statement, compute the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL 5 X b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL 2.5 X The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20XX Sales (25,000 tires at $40 each) Less: Variable costs (25,000 tires at $15) Contribution margin Less: Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (40%) Earnings after taxes (EAT) $ 1,000,000 375,000 625,000 500,000 125,000 75,000 50,000 20,000 $ 30,000 Given this income statement, compute the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL 5 X b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL 2.5 X

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a Degree of Operating Leverage DOL DOL Contribution Margin EBIT From the income statement we have Co... View the full answer