Purchase Solution

# Harding Company: Operating And Financial leverage

Not what you're looking for?

Can you help me with the following problem:

The Harding company manufactures skates. The company's income statement for 2001 is as follows:

HARDING COMPANY
Income statement
For the Year Ended December 31, 2001

Sales (10,000 skates @\$50 each)........................\$500,000
Less Variable costs (10,000 skates at \$20)......... 200,000
Fixed costs................................................... 150,000
_________
Earnings before interest and taxes (EBIT)............ 150,000
Interest expense............................................... 60,000
__________
Earnings before taxes (EBT)............................... 90,000
Income tax expenses (40%).............................. 36,000
__________
Earnings after taxes (EAT).................................. \$54,000

a.) How do I compute the Degree of operating leverage?
b.) How do I compute the Degree of financial leverage?
c.) How do I compute the degree of combined leverage?
d.) How do I compute the Break-even point in units (number of skates)?

Your help is GREATLY appreciated, Thank you!!

##### Solution Preview

a.) How do I compute the Degree of operating leverage?
DOL = (Sale-VC) / (Sale - VC- FC) = (500, -200,) / (500, -200, ...

##### Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

##### Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

##### Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

##### Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.