Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following information of a manufacturing company operating international trade is given: Sales Price: 7 TL / unit Variable cost: 4 TL / unit Sales

The following information of a manufacturing company operating international trade is given:
Sales Price: 7 TL /unit
Variable cost: 4 TL/unit
Sales Volume: 900,000 units
Total Fixed Costs: 400,000 TL
Finance Expenses: 100,000 TL
a) Construct analytical income statement for this firm. (10 pts)
ANALYTICAL INCOME STATEMENT
NET SALES REVENUE
Total Variable Costs
Contribution Margin
Total Fixed Costs
Operating Income
Finance Expenses
NET PERIOD INCOME
b) Calculate degree of operating leverage (DOL) and comment. (4 pts)
c) Calculate degree of financial leverage (DFL) and comment. (4 pts)
d) Calculate degree of combined leverage (DCL) and comment. (4 pts)
e) Comment about companys business risk and financial risk if the sector averages of DOL and DFL
are 1.8 and 0.9, respectively. Which method(s) of payment would you prefer for this company (if
the company is your customer/importer/buyer) explain why

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

Corporate Finance A Focused Approach

Authors: Michael C. Ehrhardt, Eugene F. Brigham

8th Edition

0357714636, 9780357714638

More Books

Students also viewed these Finance questions

Question

2. Avoid basing most of a report-card grade on one test.

Answered: 1 week ago