Given the Following Financial Data for Cosmos, Compute the Firm's

question 45

Multiple Choice

Given the following financial data for Cosmos, compute the firm's degree of combined leverage. $$\begin{array} { l r r } & \underline { 2010 } & \underline { 2011 } \\\text { Sales } & \$ 780,000 & \$ 874,000 \\\text { Fixed costs } & 195,000 & 218,500 \\\text { Variable costs } & 460,200 & \underline { 524,400 } \\\text { EBIT } & 124,800 & 131,100 \\\text { Interest } & 46,800 & 52,400 \\\text { EPS } & \$ 0.42 & \$ 0.51\end{array}$$

• A) $0.42
• B) 8.37
• C) -2.15
• D) 1.78

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Definitions:

Return On Equity

Net income divided by owners’ equity; also called return on investment (ROI).

Revenue Accounts

Accounts that track the income generated from the sale of goods or services before any expenses are subtracted.