Shown here are condensed income statements for two different companies (both are organized as LLCs and pay

Question:

Shown here are condensed income statements for two different companies (both are organized as LLCs and pay no income taxes).


Shown here are condensed income statements for two different companies


Required
1. Compute times interest earned for Ace Company.
2. Compute times interest earned for Deuce Company.
3. What happens to each company’s net income if sales increase by 30%?
4. What happens to each company’s net income if sales increase by 50%?
5. What happens to each company’s net income if sales increase by 80%?
6. What happens to each company’s net income if sales decrease by 10%?
7. What happens to each company’s net income if sales decrease by 20%?
8. What happens to each company’s net income if sales decrease by 40%?
Analysis Component
9. Comment on the results from parts 3 through 8 in relation to the fixed-cost strategies of the two companies and the ratio values you computed in parts 1 and2.

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Fundamental Accounting Principles

ISBN: 978-0078110870

20th Edition

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

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