Question

The Sterling Tire Company’s income statement for 2013 is as follows:
STERLING TIRE COMPANY
Income Statement
For the Year Ended December 31, 2013
Sales (20,000 tires at $60 each) ........... $1,200,000
Less: Variable costs (20,000 tires at $30) ...... 600,000
Fixed costs ................... 400,000
Earnings before interest and taxes (EBIT) ....... 200,000
Interest expense ................ 50,000
Earnings before taxes (EBT) ........... 150,000
Income tax expense (30%) ............. 45,000
Earnings after taxes (EAT) ............. $ 105,000
Given this income statement, compute the following:
a. Degree of operating leverage.
b. Degree of financial leverage.
c. Degree of combined leverage.
d. Break-even point in units.



$1.99
Sales17
Views715
Comments0
  • CreatedOctober 14, 2014
  • Files Included
Post your question
5000