Question: Please help Problem No. 10] The following summarizes the percentage changes in operating income, percentage changes in revenues, and betas for four pharmaceutical firms. Firm

Please help

in operating income, percentage changes in revenues, and betas for four pharmaceutical

firms. Firm Change in revenue Change in operating income Beta POR Lid.

Problem No. 10] The following summarizes the percentage changes in operating income, percentage changes in revenues, and betas for four pharmaceutical firms. Firm Change in revenue Change in operating income Beta POR Lid. 27% 25% 1.00 RST Lid. 25% 32% 1.15 TUV Lid. 23% 36% 1.30 WXY Ltd. 21% 40% 1.40 Required: (1) Calculate the degree of operating leverage for each of these firms. Comment also. (it) Use the operating leverage to explain why these firms have different beta. Ans.: " change in EBIT (Operating income) Operating Leverage = change in SalesPOR Lid. = 25% = 0.93 27% RST Ltd. = 320% = 1.28 25% 36% TUV Lid. = = 1.57 23% 40% WXY Ltd. = = 1.91

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