Question
You are trying to determine the degree of leverage for 2 firms to determine which firm has the highest Operating Leverage, Financial Leverage and Total
You are trying to determine the degree of leverage for 2 firms to determine which firm has the highest Operating Leverage, Financial Leverage and Total Leverage. Identify which firm has the highest degree of each type of leverage; Operating, Financial and Total. Which one would you invest in and why?
FIRM A
2018 2019
Sales 1000000 1200000
EBIT 250000 350000
Net income 100000 150000
Firm B
2018 2019
Sales 2000000 2200000
EBIT 175000 350000
Net income 75000 150000
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Operations Management
Authors: Jay Heizer, Barry Render
11th edition
9780132921145, 132921146, 978-0133408010
