What is the degree of combined leverage

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Reference no: EM13305368

Reflects last year's operations:

Sales $18,000,000
Variable costs 7,000,000
Revenue before fixed costs $11,000,000
Fixed costs 6,000,000
EBIT $5,000,000
Interest expense 1,750,000
Earnings before taxes (EBT) $3,250,000
Taxes 1,250,000
Net income $2,000,000

REQUIRED:
1. At this level of output, what is the degree of operating leverage?
2. What is the degree of financial leverage?
3. What is the degree of combined leverage?
4. If sales increase by 15%, by what percent would EBT (and net income) increase?
5. What is your firm's break-even point in sales dollars?

Reference no: EM13305368

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