Estimate degree of operating leverage

Assignment Help Finance Basics

Reference no: EM1362230

The Harmon Company manufactures skates. The company's income statement for 2004 is as follows:

Harmon Company
Income Statement
For the Year Ended December 31, 2004

Sales (30,000 skates @ $25 each) $750,000
Less: Variable costs (30,000 skates at $7) 210,000
Fixed costs 270,000
Earnings before interest and taxes (EBIT) 270,000
Interest expense 170,000
Earnings before taxes (EBT) 100,000
Income tax expense (35%) 35,000
Earnings after taxes (EAT)
$65,000
Given this income statement, compute the following:

a. Degree of operating leverage.
b. Degree of financial leverage.
c. Degree of combined leverage.
d. Break-even point in units.

Reference no: EM1362230

Questions Cloud

Key determinant of financial leverage : All other factors held constant, the present value of a given yearly annuity decreases as the number of discounting periods each year increases.

Computation of investment amount : Suppose the total expense for your current year in college equals $20,000. Approximately how much would your parents have needed to invest 21 years ago in an account paying 8 percent compounded annually to cover this amount?

Explain how many units of labour will valentines hire : Explain how many units of labour will Valentines hire. What wage per unit of labour will Valentines pay.

Elucidate pros and cons associated with this case : If a country desires to have stable prices (or low inflation), why not simply pass a law that prohibits firms from changing prices? Elucidate pros and cons associated with this case.

Estimate degree of operating leverage : The Harmon Corporation manufactures skates. The company's income statement for 2004 is as follows:

Explain how much of the national debt is held by foreigners : Discuss - Deficit spending paves the road to ruin. Explain how much of the national debt is held by foreigners.

How eu and the united states continue to trade : If the EU and the United States continue to trade what do you think will characterize goods which the EU exports to the United States and the goods that the United States exports to the EU.

Communicating a new requirement to employees : health plan in order to receive free health care insurance within the Prestige system. Explain your plan to reach all employees and fully educate each

Evaluation useful technologies for an organization : Evaluation Useful Technologies for an Organization - Conduct further research into one of the specific emerging technologies affecting evaluation

User Account

All Pages