Calculating Operating, Financial and Combined Leverage

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MASTER OF COMMERCE – M.Com Second Year (MCO) Solved Assignments for July 2019 and January 2020 Admission Cycles

MCO Tutor Marked Solved Assignment

Course Code : MCO – 07
Course Title : Financial Management
Assignment Code : MCO-07/TMA/2019-20
Coverage : All Blocks

MCO – 07 : Financial Management Solved Assignment for 2019-20

Question 3. The following are the details of a firm:
Particulars Amount (Rs.)
Sales 85,00,000
Variable Cost 52,00,000
Fixed Cost 7,00,000
Debts 55,00,000 (9%)
Equity Capital 65,00,000
Calculate its operating, financial and combined leverage.
What will be its new EBIT if sales drop to Rs.60,00,000.

ANSWER:
OL – 1.269
FL – 1.235
CL – 1.568
New EBIT – Rs. 16,29,420
(Note: Above answers may Slightly differ due to approximation)