Softech LLC is a leading software solutions company in Oman, established in the year 2005. The company has branches in Dubai, Qatar and Malaysia. The company has received “the Malaysia best employer award” in the year 2020. Moreover, the company has reported 5% growth in their consolidated income during the first quarter of 2021. However, the internal auditing department of the company has raised concerns about the Business and financial risk of the companies. As a result, the board of directors has instructed Mr. Musharraf Ibrahim to analyse the operating, financial and combined leverages of the company to take necessary steps to minimize the overall risk. Data Extracted from the financial reports of the companies are given below Item Amount / Quantity Sales 100,000 OMR Unit Sold 1000 Nos Variable cost 40 OMR Fixed Cost 27,000 OMR Interest Expenses 3,000 OMR Additional Information The corporate tax applicable for the previous assessment year was 30%. The fixed interest payments given is for the bank loan of 150,000 OMR taken at an interest rate of 2% per annum. Question You are asked to calculate the financial leverage from the above given data
Softech LLC is a leading software solutions company in Oman, established in the year 2005. The company has branches in Dubai, Qatar and Malaysia. The company has received “the Malaysia best employer award” in the year 2020. Moreover, the company has reported 5% growth in their consolidated income during the first quarter of 2021. However, the internal auditing department of the company has raised concerns about the Business and financial risk of the companies. As a result, the board of directors has instructed Mr. Musharraf Ibrahim to analyse the operating, financial and combined leverages of the company to take necessary steps to minimize the overall risk.
Data Extracted from the financial reports of the companies are given below
|
Item |
Amount / Quantity |
|
Sales |
100,000 OMR |
|
Unit Sold |
1000 Nos |
|
Variable cost |
40 OMR |
|
Fixed Cost |
27,000 OMR |
|
Interest Expenses |
3,000 OMR |
Additional Information
The corporate tax applicable for the previous assessment year was 30%. The fixed interest payments given is for the bank loan of 150,000 OMR taken at an interest rate of 2% per annum.
Question
You are asked to calculate the financial leverage from the above given data?
2.2
none of these
11
1.1
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