Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Nike and Puma operate in the sports industry, for which the following pieces of information are given in the table below. Nike Puma Q (products
- Nike and Puma operate in the sports industry, for which the following pieces of information are given in the table below.
| Nike | Puma |
Q (products sold) | 180,000 | 210,000 |
P (price per product) | $22 | $37 |
FC (fixed cost) | $45,000 | $50,000 |
VC (variable cost per product) | $12 | $23 |
EBIT | $8,400,000 | $6,200,000 |
I (interest expenses) | $1,000,000 | $1,750,000 |
Find the following:
- Degree of operating leverage for both companies, and explain your answers.
- Degree of financial leverage for both companies, and explain your answers.
- Degree of total leverage for both companies.
Which company has higher business risk, and financial risk?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started