Question
In: Finance
Below is Income Statement information for NatNah, a builder of acoustic accessories. Revenue: $3,107,262 Variable costs:...
Below is Income Statement information for NatNah, a builder of acoustic accessories.
Revenue: $3,107,262
Variable costs: 30% of revenue
Fixed costs: $1,000,000
Depreciation: $475,000
Bond Issue A: $300,000 face value, 10% coupon
Bond Issue B: $500,000 face value, 8% coupon
Bond Issue C: $900,000 face value, 12% coupon
Tax rate: 40%
Common shares issued and Outstanding: 250,000
a. Calculate the degree of operating leverage for the firm.
b. Calculate the degree of financial leverage for the firm.
c. Calculate the degree of combined leverage for the firm.
d. If the company’s sales decrease by 15%, what percentage change in EPS would you expect to observe?
e. If the sales decrease by 15%, what will the new EPS be?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Income Statement Projected Income Statement Sales Revenue $2,500,000 Variable Costs Purchases $750,000 0.3 Direct labor $600,000...
Income Statement Projected Income Statement Sales Revenue
$2,500,000 Variable Costs Purchases $750,000 0.3 Direct labor
$600,000 0.24 $1,350,000 $1,150,000 Fixed Costs Selling $500,000
Administrative $485,000 Manufacturing Overhead $150,000 $1,135,000
Profit Dollars Percentage Calculate the Contribution Margin
Calculate the Gross Margin Ratio Calculate Breakeven Sales
Calculate Margin of Safety based on the 5% expected sales
increase.
Income Statement
Projected Income Statement
Sales
Revenue
$2,500,000
Variable
Costs
Purchases
$750,000
0.3
Direct
labor
$600,000
0.24
$1,350,000
$1,150,000
Fixed
Costs
Selling
$500,000
Administrative
$485,000...
The income statement, balance sheets, and additional information for Communication Accessories are provided. COMMUNICATION ACCESSORIES...
The income statement, balance sheets, and additional information
for Communication Accessories are provided.
COMMUNICATION ACCESSORIES
Income Statement
For the Year Ended December 31, 2021
Revenues
$
2,800,000
Gain on sale of land
4,000
Total revenues
2,804,000
Expenses:
Cost of goods sold
$
1,900,000
Operating expenses
575,000
Depreciation expense
38,000
Interest expense
16,000
Income tax expense
63,000
Total expenses
2,592,000
Net income
$
212,000
COMMUNICATION ACCESSORIES
Balance Sheets
December 31
2021
2020
Assets
Current assets:
Cash
$
182,000
$...
The income statement, balance sheets, and additional information for Communication Accessories are provided. &
The income statement, balance sheets, and additional information
for Communication Accessories are provided.
Communication Accessories
Income Statement
For the Year Ended December 31, 2021
Revenues
$2,800,000
Gain on sale of land
4,000
Total revenues
2,804,000
Expenses:
Cost of goods sold
1,900,000
Operating expenses
575,000
Depreciation expense
38,000
Interest expense
16,000
Income tax expense
63,000
Total expenses
2,592,000
Net Income
$212,000
Communication Accessories
Balance Sheets
December 31
Assets
2021
2020
Current Assets:
Cash
$182,000...
Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of...
Flow of Costs and Income Statement
Technology Accessories Inc. is a designer, manufacturer, and
distributor of accessories for consumer electronic products. Early
in 20Y3, the company began production of a leather cover for tablet
computers, called the iLeather. The cover is made of stitched
leather with a velvet interior and fits snugly around most tablet
computers. In January, $762,000 was spent on developing marketing
and advertising materials. For the first six months of 20Y3, the
company spent an additional $1,405,000...
Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of...
Flow of Costs and Income Statement
Technology Accessories Inc. is a designer, manufacturer, and
distributor of accessories for consumer electronic products. Early
in 20Y3, the company began production of a leather cover for tablet
computers, called the iLeather. The cover is made of stitched
leather with a velvet interior and fits snugly around most tablet
computers. In January, $780,000 was spent on developing marketing
and advertising materials. For the first six months of 20Y3, the
company spent an additional $1,406,000...
Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of...
Flow of Costs and Income Statement
Technology Accessories Inc. is a designer, manufacturer, and
distributor of accessories for consumer electronic products. Early
in 20Y3, the company began production of a leather cover for tablet
computers, called the iLeather. The cover is made of stitched
leather with a velvet interior and fits snugly around most tablet
computers. In January, $750,000 was spent on developing marketing
and advertising materials. For the first six months of 20Y3, the
company spent an additional $1,400,000...
Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of...
Flow of Costs and Income Statement
Technology Accessories Inc. is a designer, manufacturer, and
distributor of accessories for consumer electronic products. Early
in 20Y3, the company began production of a leather cover for tablet
computers, called the iLeather. The cover is made of stitched
leather with a velvet interior and fits snugly around most tablet
computers. In January, $760,000 was spent on developing marketing
and advertising materials. For the first six months of 20Y3, the
company spent an additional $1,407,000...
Multiple-step income statement. Shown below is revenue, expense, gain, and loss information for AAA Corporation for...
Multiple-step income statement.
Shown below is revenue, expense, gain, and loss information for
AAA Corporation for 2019.
Administrative expense 215,000
Cost of merchandise sold 408,500
Interest expense 13,000
Dividend revenue 19,500
Pre-tax loss on disposal of a component of the business
30,000
Loss from write-down of inventory 70,000
Sales revenue 945,000
Selling expenses 145,000
Instructions
Prepare a multiple-step income statement, in proper
form for 2019 for AAA Corporation that is presented in
accordance with generally accepted accounting principles (including
format...
Presented below is the income statement of Cowan, Inc.: Sales revenue  
Presented below is the income statement of Cowan, Inc.:
Sales
revenue
$380,000
Cost of goods
sold
225,000
Gross
profit
$155,000
Operating
expenses
95,000
Income before
income
taxes
60,000
Income
taxes
24,000
Net
income
$ 36,000
In addition, the following information related to net
changes in working capital is presented:
Debit
Credit
Cash
$12,000
Accounts
receivable
25,000
Inventories
$19,400
Salaries
payable (operating
expenses)
8,000
...
Presented below is the income statement of Cowan, Inc.: Sales revenue  
Presented below is the income statement of Cowan, Inc.:
Sales
revenue
$380,000
Cost of goods
sold
225,000
Gross
profit
$155,000
Operating
expenses
95,000
Income before
income
taxes
60,000
Income
taxes
24,000
Net
income $
36,000
In addition, the following information related to net
changes in working capital is presented:
Debit
Credit
Cash
$12,000
Accounts
receivable
25,000
Inventories
$19,400
Salaries
payable (operating
expenses)
8,000
Accounts
payable
14,000
...
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