Question: Problem No. 7] If the combined leverage and operating leverage figures of a company are 2.5 and 1.25 respectively, find the financial leverage and P/V

Problem No. 7] If the combined leverage and operating leverage figures

Problem No. 7] If the combined leverage and operating leverage figures of a company are 2.5 and 1.25 respectively, find the financial leverage and P/V ratio, given that the equity dividend per share is Rs. 2, interest payable per year is Rs. 1 lakh, total fixed cost Rs. 0.5 lakh and sales Rs. 10 lakhs. Ans.: Operating Leverage X Financial Leverage = Combined Leverage 1.25 X Financial Leverage = 2.5 Financial Leverage = 2 EBIT Financial Leverage = EBT EBIT Financial Leverage EBIT - Interest Let the EBIT be 'X x x 2= x-1,00,000 2x - 2,00,000 = x 2x - x=2,00,000 EBIT = x= 2,00,000 EBT = 2,00,000 - 1,00,000 = 1,00,000 Let the Contribution be 'r Operating Leverage Contribution EBIT

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