From the Following Income Statement for 2005, Calculate:
A) Degree $12 / 31 / 05$

question 44

Essay

From the following income statement for 2005, calculate:
A) Degree of financial leverage
B) Degree of operating leverage
C) Degree of combined leverage Income Statement
for the year ended $12 / 31 / 05$
$\begin{array}{lr}\text { Sales } & \$ 440,000 \\\text { Variable cost } & 240,000 \\\text { Contribution margin } & 200,000 \\\text { Fixed costs } & 96,000\\\text { EBIT } & 104,000 \\\text { Interest } &{1 9 , 2 0 0} \\\text { EBT } & 84,800 \\\text { Taxes } @ 35 \% & 29,680\\\text { Net income } & \$ 55,120 \\\text { Shares outstanding } & 16,000 \\\text { EPS } & \$ 5.52\end{array}$

• A) Degree of financial leverage
• B) Degree of operating leverage
• C) Degree of combined leverage Income Statement
• for the year ended \(12 / 31 / 05\)
• \(\begin{array}{lr}
• \text { Sales } & \$ 440,000 \\
• \text { Variable cost } & 240,000 \\
• \text { Contribution margin } & 200,000 \\
• \text { Fixed costs } & 96,000\\
• \text { EBIT } & 104,000 \\
• \text { Interest } &{1 9 , 2 0 0} \\
• \text { EBT } & 84,800 \\
• \text { Taxes } @ 35 \% & 29,680\\\text { Net income } & \$ 55,120 \\
• \text { Shares outstanding } & 16,000 \\
• \text { EPS } & \$ 5.52
• \end{array}\)

---

Definitions:

Indifference Curves

Graphs that represent various combinations of goods that give a consumer equal utility or satisfaction.

Wealth

The abundance of valuable resources, assets, or properties that an individual or entity possesses.

Expected Utility Function

An expected utility function quantifies an individual's preferences under uncertainty, ranking them according to the expected level of satisfaction or utility.

Sure Payment

A guaranteed or fixed payment that is certain to be paid, without any risk or fluctuation.