You have developed the following analytical income statement for your corporation. It represents the most recent year's operations. Your supervisor…
2025 · Solved Question with Answer
You have developed the following analytical income statement for your corporation. It represents the most recent year's operations. Your supervisor has you asked for written responses to the following questions:
| Sales [40,000 units @ Rs 200] | Rs 8,000,000 |
| Less: Variable costs @ Rs 100 | 4,000,000 |
| Contribution margin | Rs 4,000,000 |
| Less: Fixed costs | 2,000,000 |
| EBIT | Rs 2,000,000 |
| Less: Interest expense | 500,000 |
| EBT | Rs 1,500,000 |
| Less: Taxes @ 40% | 600,000 |
| Net income | Rs 900,000 |
| EPS [NI/Number of shares] | Rs 9 |
a. What is the degree of operating leverage, DOL?
b. What is the degree of financial leverage, DFL?
c. What is the degree of combined leverage, DCL? What does it mean?
d. If sales increases by 10 percent, by what percent would net income increase?