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Van Auken Lumber:Income Statement for December 31, 2007($ thousand)
Sales $36,000Cost of goods sold (25,200)Gross Profit $10,800Fixed operating costs (6,480)Earnings before interest and taxes $4,320Interest (2,880)Earnings before taxes $1,440Taxes (40%) (576)Net Income $ 864
Dividends (50%) $432
Questions:
a) Compute the degree of operating leverage, degree of financial leverage, and degree of total leverage for Van Auken Lumber.
b) Interpret the meaning of each of the numerical values you computed in part (a)
c)Briefly discuss some ways that Van Auken can reduce its degree of total leverage
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