Question
In: Accounting
Operating Leverage Income statements for two different companies in the same industry are as follows: Trimax,...
Operating Leverage
Income statements for two different companies in the same industry are as follows:
| Trimax, Inc. | Quintex, Inc. | |||
| Sales | $600,000 | $675,000 | ||
| Less: Variable costs | 300,000 | 135,000 | ||
| Contribution margin | $300,000 | $540,000 | ||
| Less: Fixed costs | 240,000 | 480,000 | ||
| Operating income | $60,000 | $60,000 |
Required:
1. Compute the degree of operating leverage for each company.
| Trimax | |
| Quintex |
2. Compute the break-even point in dollars for each company.
| Trimax, Inc. | $ |
| Quintex, Inc. | $ |
Why is the break-even point for Quintex, Inc., higher?
Because it must cover more in fixed expenses.
3. Suppose that both companies experience a 60 percent increase in revenues. Compute the percentage change in profits for each company.
| Trimax | % | |
| Quintex | % |
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Income statements for two different companies in the same industry are as follows: Trimax Inc Quintex...
Income statements for two different companies in the same
industry are as follows:
Trimax Inc Quintex Inc
Sales $500,000 $500,000
Less: Variable costs 250,000 100,000
Contribution margin 250,000 400,000
Less: Fixed Costs 200,000 350,000
Operating income 50,000 50,000
Required:
1. Compute the degree of operating leverage for each
company.
2. Compute the break-even point for each company. Explain why
the break-even point for Quintex Inc. is higher.
3. Suppose that both companies experience a 50 percent increase
in revenue. Compute...
Summary information from the financial statements of two companies competing in the same industry follows. ...
Summary information from the financial statements of two
companies competing in the same industry follows.
Barco
Company
Kyan
Company
Barco
Company
Kyan
Company
Data from the current year-end balance
sheets
Data from the current year’s income
statement
Assets
Sales
$
770,000
$
880,200
Cash
$
19,500
$
34,000
Cost of goods sold
585,100
632,500
Accounts receivable, net
46,500
64,600
Interest expense
7,900
13,000
Merchandise inventory
84,440
132,500
Income tax expense
14,800
24,300
Prepaid expenses
5,000
6,950
Net income
162,200...
Summary information from the financial statements of two companies competing in the same industry follows. Barco...
Summary information from the financial statements of two
companies competing in the same industry follows. Barco Company
Kyan Company Barco Company Kyan Company Data from the current
year-end balance sheets Data from the current year’s income
statement Assets Sales $ 810,000 $ 923,200 Cash $ 20,000 $ 35,000
Cost of goods sold 589,100 636,500 Accounts receivable, net 35,400
51,400 Interest expense 9,300 11,000 Current notes receivable
(trade) 9,000 8,400 Income tax expense 15,569 25,487 Merchandise
inventory 84,940 140,500 Net income...
Summary information from the financial statements of two companies competing in the same industry follows. Barco...
Summary information from the financial statements of two
companies competing in the same industry follows.
Barco
Company
Kyan
Company
Barco
Company
Kyan
Company
Data from the current year-end balance
sheets
Data from the current year’s income
statement
Assets
Sales
$
790,000
$
927,200
Cash
$
18,500
$
37,000
Cost of goods sold
588,100
642,500
Accounts receivable, net
36,400
59,400
Interest expense
8,200
16,000
Current notes receivable (trade)
10,000
7,800
Income tax expense
15,185
25,597
Merchandise inventory
84,340
140,500
Net income...
Summary information from the financial statements of two companies competing in the same industry follows. Barco...
Summary information from the financial statements of two
companies competing in the same industry follows.
Barco
Company
Kyan
Company
Barco
Company
Kyan
Company
Data from the current year-end balance
sheets
Data from the current year’s income
statement
Assets
Sales
$
800,000
$
926,200
Cash
$
18,500
$
34,000
Cost of goods sold
594,100
642,500
Accounts receivable, net
39,400
53,400
Interest expense
8,400
15,000
Current notes receivable (trade)
9,700
7,400
Income tax expense
15,377
25,570
Merchandise inventory
84,540
134,500
Net income...
Summary information from the financial statements of two companies competing in the same industry follows. Barco...
Summary information from the financial statements of two
companies competing in the same industry follows.
Barco
Company
Kyan
Company
Barco
Company
Kyan
Company
Data from the current year-end balance
sheets
Data from the current year’s income
statement
Assets
Sales
$
780,000
$
919,200
Cash
$
21,000
$
37,000
Cost of goods sold
588,100
642,500
Accounts receivable, net
39,400
54,400
Interest expense
8,100
19,000
Current notes receivable (trade)
9,200
7,200
Income tax expense
14,992
25,376
Merchandise inventory
84,340
132,500
Net income...
Show examples of two companies in the same industry whose financial statements are available online. Complete...
Show examples of two companies in the same industry whose
financial statements are available online. Complete several
financial ratios for each company and compare them.
What did your analysis tell you about these companies?
What sorts of decisions would this analysis help you make; such
as buying stocks, considering accepting an employment
offer,etc.?
Choose two companies (Target and Walmart) in the same industry whose financial statements are available online....
Choose two companies (Target and Walmart) in the same industry
whose financial statements are available online. Complete several
financial ratios for each company and compare them. Share your
analysis and answer the following questions.: What did your
analysis tell you about these companies? What sorts of decisions
would this analysis help you make; such as buying stocks,
considering accepting an employment offer,etc.?
Select two public companies in the same industry, obtain their most recent published financial statements, and...
Select two public companies in the same industry, obtain their
most recent published financial statements, and perform financial
ratio analysis for both. Write a report to summarize your findings
and conclusion. Your report should include:
Balance sheet ratio analysis
Income statement ratio analysis
Statement of cash flow ratio analysis
Credit rating of both companies by Standard & Poor’s and
Moody’s
Ratio comparative analysis
Clear conclusion and opinion about which company you prefer to
invest in, and why.
Look up the latest financial statements for two public companies within the same industry of your...
Look up the latest financial statements for two public
companies within the same industry of your choice and calculate the
following ratios for the latest year:
Return on capital.
Return on equity.
Operating profit margin.
Days in inventory.
Debt ratio.
Times-interest-earned.
Current ratio.
Quick ratio.
Summarize the information revealed in your ratio analysis.
Additionally, analyze the financial ratios and compare the two
companies’ performances against one another. From the ratios, can
you determine which company performed better financially?
find two...
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