Question
Six months later, Brandreth reviews industry data for the first half of 2023 that indicate a slowing growth rate in sales. Brandreth has prepared revised
Six months later, Brandreth reviews industry data for the first half of 2023 that indicate a slowing growth rate in sales. Brandreth has prepared revised projections for 2024 for both Wade and Dynamic Communication. Selected data from his revised projections for Wade are given in Exhibit 2. Brandreth is using his revised data to analyze the extent to which both Wade and Dynamic are using operating leverage and financial leverage. For Dynamic, he has calculated the degree of operating leverage in 2024 to be 2.89 and the degree of financial leverage to be 1.40.
Wade Goods & Co.
Selected Data from Revised Projections Year Ended 31 December 2024 (U.S. $ millions except for share data)
Total Revenues | $780 |
Operating Variable Costs | 252 |
Operating Fixed Costs | 210 |
Operating Income (EBIT) | $246 |
Interest Expense | 98 |
Taxes | 59 |
Net Income | $89 |
Earnings per Share | $8.88 |
Dividends per Share | $0.17 |
Total Assets | $1,170 |
Long-term Debt | $984 |
Total Shareholders' Equity | $116 |
Number of Shares Outstanding (millions) | 12 |
Calculate the degree of total leverage for Dynamic's in 2024.
A. | 2.8197 | |
B. | 4.6036 | |
C. | 4.06037 |
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