Degree of financial leverage-firms break-even point


Task:

Sales (30,000 units)              $150,000
Variable costs                        100,800
Contributions margin             $ 49,200
Fixed manufacturing costs        24,000
Operating Income                 $ 25,200
Interest                                  18,000
Earnings Before Taxes            $ 7,200
Taxes (30%)                            2,160
Net Income                           $ 5,040
Shares Outstanding                     600

Q1. This firm's break-even point is:

A)    4,800 units
B)    14,634 units
C)    7,142 units
D)    18,000 units

Q2. The Degree of Operating Leverage (DOL) is

A)    1.58x
B)    1.95x
C)    3.50x
D)    1.40x

Q3. The Degree of Financial Leverage (DFL) is

A)    3.50x
B)    1.40x
C)    1.95x
D)    1.58x

Q4. The Degree of Combined Leverage (D.C.L.) is

A)    3.08x
B)    5.45x
C)    2.73x
D)    6.83x

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Finance Basics: Degree of financial leverage-firms break-even point
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