Exhibit 19-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 75

Multiple Choice

Exhibit 19-5
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
You are provided with the following information about Albermarle Corp. $\begin{array}{lr} \text { Income Statement Data } &\\ \text { Sales } &542 \\ \text { Operating Income } &38 \\ \text { Depreciation } &3 \\ \text { Interest Expense } &3 \\ \text {Pretax Income } &32 \\ \text {Income Taxes } &13 \\ \text { Net Income after tax } &19\\\\ \text { Balance Sheet Data } &\\ \text { Fixed Assets } &41\\ \text { Total Assets } &245\\ \text {Working Capital } &123\\ \text { Total Debt } &16\\ \text { Equity } &159\\\end{array}$
-Refer to Exhibit 19-5. Calculate the financial leverage.

• A) 1.05
• B) 5.32
• C) 2.15
• D) 1.54
• E) 2.31

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Definitions:

Contribution Margin Ratio

A financial metric that shows what percentage of sales revenue is available to cover fixed costs and generate profit.

Variable Costs

Costs that change in proportion to the level of activity or volume of production, such as raw materials and labor expenses.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, offering predictability in budgeting.

Operating Leverage

A measure of the relative mix of a business’s variable costs and fixed costs, computed as contribution margin divided by operating income.