Following data is related to company A and B. (Marks 07)

Company A Company B

EBIT 50,000 72,000

Fixed Cost 10,000 33,000

Variable Cost 20,000 12,000

Interest Cost 6,500 14,000

Preferred Dividends 4,000 7,000

Tax rate 25 % 25 %

What is degree of operating leverage and degree of financial leverage for both firms. Interpret your answer also. What will be degree of total leverage for both firms? Interpret your answer. Which company is riskier in which aspect and wh