a.
To calculate: The degree of operating leverage (DOL) of Harding Company.
Introduction:
Degree of operating leverage (DOL):
It is a multiple measurement ratio which determines the quantity of change in operating income of the company with the change in sales value.
b.
To calculate: The Degree of financial leverage (DFL) of Harding Company.
Introduction:
Degree of financial leverage (DFL):
DFL is a leverage ratio that evaluates the reaction of a company's EPS to the variations in its operating income, as a consequence of alterations in its capital structure.
c.
To calculate: The Degree of combined leverage (DCL) of Harding Company.
Introduction:
Degree of Combined Leverage (DOL):
It summarises the effect of the combination of both operating as well as financial leverages on a firm. It helps in determining the risk of any firm. A company with high DCL is considered more risky.
d.
To calculate: The break-even point (BEP) of Harding Company.
Introduction:
The Break-even point (BEP):
It is a point of sale at which a company is in a no
Want to see the full answer?
Check out a sample textbook solutionChapter 5 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
- Using these formulas: 1-Breakeven Point Formula: FC Q = P – vc 2-Degree of Operating Leverage (DOL): Percentage change in EBIT Percentage change in sales DOL 3-The formula for calculating the degree of operating leverage at a base sales level, Q, is the following: QX (P- vc) QX (P– vc) – FC Q: the sales level. P: sale price. vc: variable operating costs per unit. DOL(Q) = %3D FC: fixed operating costs. 4-The Degree Of Financial Leverage (DFL): Percentage change in EPS Percentage change in EBIT DFL EBIT DFL at base level EBIT - EBIT - I- (PD x 5-degree of total leverage (DTL) Percentage change in EPS Percentage change in sales DTL = QX (P- vc) PD Q x (P – vc) – FC –-1-) DTL at Q units =arrow_forward3. Based on segment margin and average assets, compute the profit margin4. Based on segment margin and average assets, compute the asset turnover5. Based on segment margin and average assets, compute the ROI.arrow_forwardR (X) = 55x and C (x) = 30x + 250 for total revenue and total cost functions a-) profit function pi (x) for firms and b-) Find the breakeven point.arrow_forward
- Calculate the amount of owner's equity (in $) and the two leverage ratios for the given company. (Round ratios to the nearest hundredth.) *Chart Attached*arrow_forwardDuPont system of analysis Use the following financial information for AT&T and Verizon to conduct a DuPont system of analysis for each company. Sales Earnings available for common stockholders Total assets Stockholders' equity a. Which company has the higher net profit margin? Higher asset turnover? b. Which company has the higher ROA? The higher ROE? c. Which company has the higher financial leverage multiplier? a. Net profit margin (Round to three decimal places.) AT&T Net profit margin AT&T $164,000 13,333 403,921 201,934 Verizon Verizon $126,280 13,608 244,280 24,232arrow_forwardA supply chain has the following information:(a). Compute the total supply chain throughput time for all the entities from beginning to end.b. Compute the cash-to-cash cycle time for each of thefour entities separately. Based on this calculation, who is benefiting the most?c. Compute the total delivered unit cost in the supplychain from beginning to end. How much profit isthere in the supply chain?arrow_forward
- 1. The function of a company's product to produce output at the level of input use is Q = -1/3x3 + 9x3 + 70. If the input price x used is IDR. 800, - per unit, while the output price is IDR. 10, - per unit, specify: a. The amount of input that must be used by the company in orderto produce the amount of output that provides maximum finance! How much is the output? b. What is the average size of the company?arrow_forwardCompute the percentage change of Earnings Per Share Compute the Combined Leverage of the expected unit Compute the Operating Leverage of the expected units. Compute the Financial Leverage of the expected units. Compute the cOMBINED Leverage of the expected units.arrow_forwardThe total revenue function for a product is given by R=805 x dollars, and the total cost function for this same product is given by c=24500+70x+x square, where C is measured in dollars. For both functions, the input x is the number of units produced and sold. a. Form the profit function for this product from the two given functions. b. What is the profit when 26 units are produced and sold? c. What is the profit when 40 units are produced and sold? d. How many units must be sold to break even on this product?arrow_forward
- The Marine Division of Pacific Corp. has average invested assets of $120,000,000. Sales revenue of $50,210,000 results in an operating income of $9,964,000. The hurdle rate is 8%. a. Calculate the return on investment. (Round your answer to 2 decimal places.) Raun mant b. Calculate the profit margin. (Round your answer to 2 decimal places.) c. Calculate the investment turnover. (Round your answer to 4 decimal places.) Next >arrow_forwardCalculate gross profit, cost of goods sold, and selling price MBI, Inc., hat sales of $250 million for fiscal 2013. The company's gross profit ratio for that yea was 37.2%,arrow_forwardSuppose a ceiling fan manufacturer has the total cost function C(x) = 35x + 1200 and the total revenue function R(x) = 65x. (a) What is the equation of the profit function P(x) for this commodity? P(x) = (b) What is the profit on 20 units? P(20) = Interpret your result. The total costs are less than the revenue. The total costs are more than the revenue. The total costs are exactly the same as the revenue. (c) How many fans must be sold to avoid losing money? fansarrow_forward
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
- Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage LearningCorporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education