A company has an EBIT of 700,000 and interest expense of 30,000. B company has EBIT of

Fantastic news! We've Found the answer you've been seeking!

Question:

A company has an EBIT of 700,000 and interest expense of 30,000. B company has EBIT of 1,500,000 and interest expense of 30,000.

What company has the higher degree of financial leverage and why?

Related Book For answer-question

Principles Of Managerial Finance

ISBN: 978-0136119463

13th Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

See More Books

Posted Date: Jun 23, 2023 03:18 AM

See More Questions

An industrial company is currently rated A-. It has an EBIT of $500 million and an interest expense of $75 million. Suppose the median interest coverage ratio for an A- rated industrial company is...
Sheehan Corp. is forecasting an EPS of $3.00 for the coming year on its 500,000 outstanding shares of stock. Its capital budget is forecasted at $800,000, and it is committed to maintaining a $2.00...
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
O An hair dryer is basically a duct with a fan that draws cool air from the atmosphere at one end, forces it on an electrical resistor (where the air is heated up) and discharges it at the other end....
Find the proper length of a rod if in the laboratory frame of reference its velocity is v = c/2, the length l = 1.00 m, and the angle between the rod and its direction of motion is = 45.
Creeping flow around a spherical bubble, when a liquid flows around a gas bubble, circulation takes place within the bubble. This circulation lowers the interfacial shear stress, and, to a first...
How should a capital expenditure be recorded? a. Debit capital b. Debit an expense C. Debit a liability d. Debit an asset
Rouse Manufacturing Limited produces and sells one product, a three-foot Canadian flag. During 20X0, the company manufactured and sold 65,000 flags at $27 each. Existing production capacity is 75,000...
Question 5 Consider zero-coupon Treasury bonds, i.e. bonds with zero default risk that do not pay any interest, but only promise to repay the principal at maturity. Despite being default risk free,...
Ridge Development Group is formed on June 1st by John Parks and Sue Jones to operate as a calendar-year, accrual- basis company that develops and markets land to customers. John will contribute land...
Prepare trading account of the trended 3 1 dec 2 0 1 0 opening stock 5 7 0 0 , purchases 1 5 8 0 0 0 , purchase return 9 0 0 , sales 2 6 2 0 0 0 , sales return 6 0 0 , closing stock 8 6 0 0
7(a) Find the radial and transverse components of the velocity of a particle moving along the curve ax2 +by2 =1 at any time t if the polar angle = ct2. 9 (b) A particle is projected vertically...
BIO Ions on cell walls The membrane of a body cell has a positive ion of charge on the outside wall and a negative ion of charge on the inside wall. Determine the magnitude of the electrical force...
Tort Law - Case of Liebeck v. McDonald's Has tort law changed since then this case occurred in 1992? How so? Can you Compare and contrast the Liebeck v McDonald's case to a recent case involving...
Calculate the missing information based on the format of the income statement. Net Sales Cost of Goods Sold Gross Margin ($) Operating Expenses Net Profit ($) $336,500 $132,100 $ $109,000 $
TranscribedText: The Commonwealth Constitution gives effect to the doctrine of 'separation of powers' by creating HE distinct branches of goverrl'nent: the legislature, executive and the judiciary....
Compute net cash flows from investing activities as a percentage of sales. Company investing cash flows/Sales Rank -1.8% -2.2% 1.2% -4.5% -4.7% Macys Home Depot Best Buy Target Walmart
The Home Depot is the leading retailer in the home improvement industry and one of the 10largest retailers in the United States. The company included the following on its January 29, 2012, balance...
How is the future value of a mixed stream of cash flows calculated? How is the present value of a mixed stream of cash flows calculated?
What is the capital market? What are the primary securities traded in it?
Briefly name and describe some organizational forms other than corporations that provide owners with limited liability.
True or false? Explain: modularity reduces complexity because A. It reduces the effect of incommensurate scaling. B. It helps control propagation of effects.
True or false? Explain: hierarchy reduces complexity because A. It reduces the size of individual modules. B. It cuts down on the number of interconnections between elements. C. It assembles a number...
If one created a graph of personal friendships, one would have a hierarchy. True or false?

A company has an EBIT of 700,000 and interest expense of 30,000. B company has EBIT of

Question:

Expert Answer:

ANSWER The financial leverage ratio measures the proportion of a companys earnin... View the full answer

Principles Of Managerial Finance

Students also viewed these finance questions