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The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20xx Sales (30,000 tires
The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20xx Sales (30,000 tires at $45 each) Less: Variable costs (30,000 tires at $30) Contribution margin Less: Fixed costs Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (35%) Earnings after taxes (EAT) $ 1,350,000 900,000 450,000 300,000 150,000 60,000 90,000 31,500 58,500 Given this income statement, compute the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL b. Degree of financial leverage. (Round the final answer to 2 decimal places.) DFL c-1. Degree of combined leverage. (Do not round the intermediate calculations. Round the final answer to 2 decimal places.) DCL
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