Question

Identify details from paragraphs 1-3 to explain to what social class the mother and daughter belong. Why might the author want us to know about their social class?

Answer 1

Leverage and Capital Structure

1. A Ltd. has an average selling price of Rs. 10 per unit. Its variable unit costs are Rs.

7, and fixed costs amount to Rs. 1,70,000. It finances all its assets by equity funds. It

pays 50% tax on its income. B Ltd. is identical to A Ltd. except in respect of the

pattern of financing. The latter finances its assets 50% by equity and 50% by debt, the

interest on which amounts to Rs.20,000. Determine the degree of operating, financial

and combined leverages at Rs. 7,00,000 sales for both the firms, and interpret the

results.