Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 2 Two firms, Marchand and Gruenler, from the same industry reported the following income statements. a. Calculate the operating leverage for the two firms

image text in transcribed

Question 2 Two firms, Marchand and Gruenler, from the same industry reported the following income statements. a. Calculate the operating leverage for the two firms (using 2018 sales as the base) b. Compare the leverage of all types used by the two firms and discuss its impact on the firms' cost of capital. 2018 2019 $110,000$150,000 Marchand, Inc. Sales -COGS and Other Variable Operating Costs -Fixed Operating Costs EBIT Interest EBT -Taxes Net Income - 77,00C 105,000 - 15,00C- 15,000 18,000 30,000 - C- 0 18,000 30,000 - 5,400- 9,000 $ 12,60CS 21,000 2003 2004 $110,000$150,000 Gruenler, Inc. Sales -COGS and Other Variable Operating Costs -Fixed Operating Costs EBIT -Interest EBT -Taxes Net Income - 66,000- 90,000 - 25,000- 25,000 19,000 35,000 5,000- 5,000 14,000 30,000 - 4,200- 9,000 $ 9,800S 21,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial And Managerial Accounting For MBAs

Authors: Peter D. Easton, John J. Wild, Robert F. Halsey, Mary Lea McAnally

5th Edition

1618532324, 9781618532329

More Books

Students also viewed these Accounting questions

Question

A service window closes just as they get to the front of the line.

Answered: 1 week ago