The Long-Life Battery Co. generates $8 million of profits on sales of $10 million and generates $10 million of profits on sales of $15 million. What is the degree of operating leverage?
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The Long-Life Battery Co. generates $8 million of profits on sales of $10 million and generates $10 million of profits on sales of $15 million. What is the degree of operating leverage?
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- The CFO of Jupiter Jibs (JJ) expects this year’s sales to be $2.5 million. EBIT is expected to be $1 million. The CFO knows that if sales actually turn out to be $2.3 million, JJ’s EBIT will be $880,000. What is JJ’s degree of operating leverage (DOL)?Required: 1. How many units would the company need to sell to earn a profit before taxes of $10,000? 2. If the company achieves its projections, what will be its degree of operating leverage?At a base sales level of R400,000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. What is the firm's degree of total leverage.
- A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion. Thecompany’s total assets equal total invested capital, and its capital consists of half debt and halfcommon equity. The firm’s interest rate is 5% and its tax rate is 40%.a. What is its profit margin?b. What is its ROA?c. What is its ROE?d. What is its ROIC?e. Would this firm’s ROA increase if it used less leverage? (The size of the firm does notchange.)Bulldogs Inc. has sales of P4,500,000, variable costs equal 75% of sales, and a fixed interest costs of P750,000. The current operating income of the firm is P1,050,000. What is the degree of combined leverage?(Using degree of operating leverage) Last year Baker-Huggy Inc. had fixed costs of $150,000 and net operating income of $34,000. If sales increase by 18 percent, by how much will the firm's NOI increase? What would happen to the firm's NOI if sales decreased by 21 percent? If sales increase by 18%, the change in the firms NOI will be (a decrease or increase) of _ %
- Given the following financial data for Cosmos, compute the firm's degree of combined leverage. 2010 2011 Sales $780,000 $874,000 Fixed costs 195,000 218,500 Variable costs 460,200 524,400 EBIT 124,800 131,100 Interest 46,800 52,400 EPS $0.42 $0.51A firm has a tax burden ratio of .75, a leverage ratio of 1.25, an interest burden of .6, and a return on sales of 10%. The firm generates $2.40 in sales per dollar of assets. What is the firm’s ROE?If sales increase from Php 800,000.00 to Php 900,000.00, and if the degree of operating leverage is 5, one would expect profit to increase by?
- What is operating leverage, and how does itaffect a firm’s business risk? Show the operating break-even point if a company has fixedcosts of $200, a sales price of $15, and variablecosts of $10.A company has $200 billion of sales and $10 billion of net income.Its total assets are $100 billion, financed half by debt and half bycommon equity. What is its profit margin? (5%) What is its ROA?(10%) What is its ROE? (20%) Would ROA increase if the firm usedless leverage? (Yes) Would ROE increase? (No)The value of a firm's invested capital is 300 million. Its return on invested capital is 12%, and its WACC is 10.5%. What is the economic value added/economic profit?
