Gentech, Inc A)013
B)1

question 68

Multiple Choice

Gentech, Inc. is an integrated circuit (microchip) manufacturer based out of New Jersey. Its principal products include microprocessors and motherboard chipsets. Selected financial statement values for Gentech are shown in the table, below. What is the degree of operating leverage for Gentech given the change in revenues from Year 1 to Year 2? $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Gentech Inc. } \\( \$ 000 \text { s } ) \end{array} & & \\\hline & \text { Year 1 } & \text { Year 2 } \\\hline \text { Revenues } & \$ 70,000 & \$ 75,000 \\\hline \begin{array} { c } \text { Cost of Goods } \\\text { Sold }\end{array} & 45,000 & 48,500 \\\hline \text { SG\&A } & 13,000 & 13,500 \\\hline \text { Depreciation } & 3,000 & 3,200 \\\hline \text { EBIT } & 9,000 & 9,800 \\\hline\end{array}$$

• A)0.13
• B)1.17
• C)1.00
• D)1.24
• E)0.75

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Definitions:

Behavior Categories

Groups or classifications used to organize and describe different types of behaviors.

Moving Toward People

A behavior characterized by seeking affiliation and support from others, often discussed in the context of interpersonal relations and personality.

Neurotics

Individuals who experience high levels of anxiety, emotional instability, and excessive worrying, often related to neurotic disorders.

Basic Anxiety

A term by psychoanalyst Karen Horney, referring to feelings of helplessness and insecurity that adults experience because of childhood experiences.