Use the Information for the Question(s)below

question 30

Multiple Choice

Use the information for the question(s) below.
Fly by Night Aviation (FBNA) expects to have net income next year of $24 million and interest expense of $3 million.FBNA's corporate tax rate is 21%.
-IF FBNA increases leverage so that its interest expense rises by $1 million,then the amount its unlevered EBIT will change is closest to:

• A)$0.
• B)-$400,000.
• C)$600,000.
• D)$400,000.

Understand the basic differences between merchandising and service businesses in terms of financial statements.

Comprehend how to calculate gross profit and operating income.

Recognize the differences in accounting for inventory in a merchandising business.

Understand the role of gross profit in the income statement and how it is calculated.