By what amount will the taxable income increase

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Question - The following data is available for XYZ Ltd.

Sales Rs.2,00,000

Variable cost 60,000

Contribution 1,40,000

Fixed cost 1,00,000

EBIT 40,000

Interest 5,000

PBT 35,000

Find out:

(i) Using the concept of financial leverage, by what % will the taxable income increase if EBIT increases by 6%.

(ii) Using the concept of operating leverage, by what % will the EBIT increase if there is 10% increase in sales, and

(iii) Using the concept of combined leverage by what % will the taxable income increase if the sales increase by 6%.

Reference no: EM132768748

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