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Leverages - Class Notes
Leverages - Class Notes
Financial Leverage
Plan A Plan B
Debt 10,000 5,000
Interest on debt is 20% 2,000 1,000
Plan A Plan B
Combined Leverages Situation I 1.61 1.55
Combined Leverages Situation II 1.96 1.88
Particulars Rs. Rs.
Sales 7,500,000 5,000,000
Variable cost -4,200,000 -2,800,000 -56%
Gross Margin / Contribution 3,300,000 2,200,000
Fixed costs -600,000 -600,000
EBIDTA EBIT / Operating Profit 2,700,000 1,600,000 0.36 0.32
Interest -405,000
EBT 2,295,000