The Harding Company manufactures skates. The company's income statement for 2013 is as follows: Sales (10,500 skates
Question:
The Harding Company manufactures skates. The company's income statement for 2013 is as follows:
Sales (10,500 skates @ $60 each).....................$630,000
Less: Variable costs (10,500 skates at $25)....... 262,500
Fixed costs......................................................200,000
Earnings before interest and taxes (EBIT)............$167,500
Interest expense......................................................62,500
Earnings before taxes (EBT)...................................$105,000
Income tax expense (30%)........................................31,500
Earnings after taxes (EAT).........................................$73,500
Given this income statement, compute the following:
a. degree of operating leverage
b. degree of financial leverage
c. degree of combined leverage
d. break-even point in units (number of skates)
Foundations of Financial Management
ISBN: 978-1259277160
16th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen