Question

Interest on debentures rs 400000 preference shares dividend rs 200000 tax rate is 4% if EBIT is rs 1500000 the financial leverage is what

Answer 1

Answer:

Financial Leverage = Let the EBIT be ' x ' 2 = 2 = X x - 1,00,000 2x2,00,000 x EBIT = x = 2,00,000 EBT = 2,00,000 1,00,000 1,00,000 Let the Contribution be ' x ' Operating Leverage = x 2,00,000 Sales = EBIT EBIT - Interest Contribution = x = 4,00,000 Variable cost as % of sales is 50 % . That means contribution to sales is 50 % . Thus , 4,00,000 50 % Contribution EBIT = 8,00,000