Question

Mr. Jamil is a thin guy with short height, His son was also thin and short but at the age of 20 he developed muscles and became tall and strong.
a) What do you think the reasons are? /1

b) What factor has caused the variation and why?

(Will mark Brainly and follow if you answer correctly)

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.