Q)

1-(Leverage Analysis) You have developed the following analytical income statement for the Hugo Boss Corporation. It represents the most recent year's operations, which ended yesterday

Sales $50,439,375

Variable costs -25,137,000

Revenue before fixed costs $25,302,375

Fixed costs -10,143,000

EBIT $15,159,375

Interest expense -1,488,375

Earnings before taxes $13,671,000

Taxes at 50% -6,835,500

Net income $6,835,500

Your supervisor in the controller's office has just handed you a memorandum asking for written responses to the following questions:

a.At this level of output, what is the degree of operating leverage?

b. What is the degree of financial leverage?

c. What is the degree of combined leverage?

d. What is the firm's break-even point in sales dollars?

e. If sales should increase by 30 percent, by what percent would earnings before taxes (and net income) increase.

2- "Understanding Operating, Financial and Combined leverage is important in business financial risk analysis." Elaborate the statement.