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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 (45,000 tires at
The Sterling Tire Company's income statement for 20XX is as follows: STERLING TIRE COMPANY Income Statement Year ended December 31, 20XX Sales (45,000 tires at $60 each) Less: Variable costs (45,000 tires at $35) $ 2,700,000 1,575,000 Contribution margin Less: Fixed costs 1,125,000 1,800,000 Earnings before interest and taxes (EBIT) Interest expense 125,000 25,000 Earnings before taxes (EBT) Income tax expense (30%) 100,000 30,000 Earnings after taxes (EAT) $ 70,000 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 X
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