The Capital structure of ABC Ltd, is as under: Equity share capital ₹ 100 Lacs 10%...

The Capital structure of ABC Ltd, is as under:

Equity share capital ₹ 100 Lacs

10% Debentures ₹ 50 Lacs

The sales for the year 2019 are 1.5 Lac units@ ₹ 40per unit

 Also, the variable cost per unit is 20 % of sales revenue

 ₹ 12 Lacs is the fixed operating cost.

 Assume Income tax rate as 40 %

Calculate Operating, Financial and Combined Leverage of the firm and interpret the result.

Solutions

Expert Solution

✓ Operating leverage = 1.3333

✓ Financial leverage = 1.1613

✓ Combined leverage = 1.5484

PLEASE GIVE UPVOTE AND DO SUPPORT

jeff jeffy answered 1 year ago

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