15-28A. (Leverage analysis) You are supplied with the following analytical income statement for your finn. It reflects last year's operations.

a.ı At this level of output, what is the degree of operating leverage?
b.ı What is the degree of financial leverage?
c.ı What is the degree of combined leverage?
d.ı If sales should increase by 20 percent, by what percent would earnings before taxes (and net income) increase?

e. What is your firm's break-even point in sales dollars?

Transcribed Image Text:

Sales Variable costs Revenue before fixed costs Fixed costs EBIT Interest expense Earnings before taxes Taxes Net income $16,000,000 8,000,000 $ 8,000,000 4,000,000 $ 4,000,000 1,500,000 $ 2,500,000 1,250,000 $ 1,250,000