Answered: The degree of financial leverage is

Business

Finance

The degree of financial leverage is

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter12: Capital Structure

Section: Chapter Questions

Problem 10PROB

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Question

100%

Sales (30,000units) P 150,000

Variable costs 100,800

Contribution margin P 49, 200

Fixed manufacturing costs 24,000

Operating income P 25,200

Interest 18,000

Earnings before taxes P 7,200

Taxes (at 31%) 2,160

Net income P 5,040

Shares outstanding 600

The degree of financial leverage is

a. 3.50x

b. 1.40x

c. 1.95x

d. 1.58x

Definition Definition Total cost of procuring or producing a product or the cost that an individual or business owner undertakes for the manufacturing of goods.

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