Use the following information to compute the firms degree of operating leverage (DOL), DFL, and degree of

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Use the following information to compute the firm’s degree of operating leverage (DOL), DFL, and degree of total leverage (DTL):

Sales........................................................... $ 50,000
Variable operating costs.......................... ( 30,000)
Gross profit............................................... $ 20,000
Fixed operating costs............................... ( 15,000)
Net operating income (EBIT)........................ 5,000
Interest expense......................................... ( 3,000)
Earnings before taxes (taxable income)...$ 2,000
Taxes (35%)..................................................... ( 700)
Net income..................................................... 1,300

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Essentials of Managerial Finance

ISBN: 978-0324422702

14th edition

Authors: Scott Besley, Eugene F. Brigham

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