Question

If Sales is Rs. 2000, variable cost is
Rs. 1200, fixed cost Rs.400 and interest is
Rs.100 what is Combined Leverage?
0.5
2
2.67
1.33​

Answer 1

Answer:

2.67 is answer please make it brainleast

Answer 2

Answer:

The combined leverage is 1.33

The option D is correct.

Explanation:

Given: The following particulars are available :

Sales $\quad Rs. 2000$

Variable Cost $Rs. 1200$

Fixed Cost $Rs. \quad 400$

At 100 percent

Find: Compute the combined leverage

Step 1 :

Combined Leverage is the multiplication of operating leverage and financial leverage.

$\underline{\text { Return on Investment }}$

Sales - Variable Cost - Fixed Cost

$\begin{aligned}\text { EBIT }=& \text { Rs. } 2000-\text { Rs. } 1200-\text { Rs. } 400=\text { Rs. } 400 \\& \text { Rs. } 400 \\\end{aligned}$

$\underline{\text { Operating Leverage }} \frac{\mathrm{C}}{\text { EBIT }}=\frac{\text { Rs. } 3600}{\text { Rs. } 400}=9$

$\underline{\text { Financial Leverage }} \begin{aligned}&\text { EBIT } \\&\text { EBT }\end{aligned}=\frac{\text { Rs. } 2000}{\text { Rs. } 190}=1.17 \underline{\text { Combined Leverage }}=1.17 * 1.22=1.43$