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  • Leverage HW

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    Company A had sales of Rs. 140,000, variable costs of Rs. 56,000, fixed costs of Rs. 20,000, interest expense of Rs. 12,000, and financial leverage of 5:1. Company B had sales of Rs. 1,05,000, variable costs of 60% of sales, interest expense of Rs. 9,000, and operating leverage of 4:1. Both companies had a tax rate of 30%.

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    Company A had sales of Rs. 140,000, variable costs of Rs. 56,000, fixed costs of Rs. 20,000, interest expense of Rs. 12,000, and financial leverage of 5:1. Company B had sales of Rs. 1,05,000, variable costs of 60% of sales, interest expense of Rs. 9,000, and operating leverage of 4:1. Both companies had a tax rate of 30%.

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    Leverage HW

    Uploaded by

    Uditti
    Company A had sales of Rs. 140,000, variable costs of Rs. 56,000, fixed costs of Rs. 20,000, interest expense of Rs. 12,000, and financial leverage of 5:1. Company B had sales of Rs. 1,05,000, variable costs of 60% of sales, interest expense of Rs. 9,000, and operating leverage of 4:1. Both companies had a tax rate of 30%.

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    of 100

    LEVERAGE

    1. From the following information of Company A and Company B, prepare


    their Income Statement:

    Company A Company B
    Variable Cost Rs. 56,000 60% of Sales
    Fixed Cost Rs. 20,000 ?
    Interest Expense Rs. 12,000 Rs. 9,000
    Financial Leverage 5:1 ?
    Operating Leverage ? 4:1
    Tax Rate 30% 30%
    Sales ? Rs. 1,05,000

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