The financial statements of two companies are listed below for the recently concluded year 2020. You are
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Question:
The financial statements of two companies are listed below for the recently concluded year 2020. You are asked to analyse the following-
a) As both the firms are operating in the same industry, find the degree of operating and financial risk of both the firms and analyse the results
b) If in the current year (2021) due to Covid-19 the sales are expected to be decline by 30% for both the firms, find and analyse the impact on both the firms EBIT & EPS.
Company X | Company Y | |
Rs (Million) | Rs (Million) | |
Sales | 5000 | 8000 |
VC | 3000 | 4800 |
Operating FC | 1000 | 2500 |
Interest | 500 | 0 |
Tax rate | 30% | 30% |
No of shares (No) | 200 | 200 |
Expert Answer:
To analyze the degree of operating and financial risk for both companies X and Y we can calculate their operating and financial leverage ratios Operat... View the full answer
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