From the Following Income Statement, Calculate the
A) Degree of Financial

question 58

Essay

From the following income statement, calculate the
a) degree of financial leverage.
b) degree of operating leverage.
c) degree of combined leverage.
$\quad$ $\quad$ $\quad$ $\quad$ Income Statement
$\quad$ $\quad$ For the year ended $12 / 31 / 10$
$\begin{array} { l r } \text { Sales } & \$ 575,000 \\ \text { TVC } & 260,000 \\ \text { Fixed costs } ( \mathrm { FC } ) & \underline{94,000} \\ \text { EBIT } & 221,000 \\ \text { Interest } & \underline{19.500} \\ \text { EBT } & 201,500 \\ \text { Taxes a } 35 \% & \underline { 70.525 } \\ \text { Net income } & 130,975 \\ \text { Shares outstanding } & 20,000 \\ \text { EPS } & \$ 6.55 \end{array}$

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Definitions:

Lockout

A negotiating tactic in which a firm forbids its unionized workers to return to work until a new collective bargaining agreement is signed; a means of imposing costs (lost wages) on union workers.

Union Representatives

Individuals elected or appointed to represent the interests and concerns of members within a labor union.

Labor Dispute

A disagreement between employees and employers, often involving issues like wages, working conditions, and union representation.

Contract Expired

A legal agreement that has reached the end of its term and thus is no longer in effect, often requiring renewal or negotiation of new terms.