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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 $45) $ 2,700,000 2,025,000 Contribution margin Less: Fixed costs 675,000 600,000 75,888 15,000 Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Income tax expense (36%) 60,000 21,600 Earnings after taxes (EAT) 38,400 Given this income statement, compute the following: a. Degree of operating leverage. (Round the final answer to 2 decimal places.) DOL X b. Degree of financial leverage (Round the final answer to 2 decimal places.)
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