Leverage leverage: Combined 5 x 4 = 20 4 x 5 = 20 7 x 6 = 42 Very high Very high Very very high Good Satisfactory Poor (2) Profitability: = (3) Working: Calculation of sales for p EBIT 4 (i) DFL = EBT 1 Interest is Rs. 45,000 .. EBIT – EBT = Rs. 45,000 … 4 EBT = EBIT :. 4 EBT – EBT = 45,000 :: 3 EBT = 45,000 45,000 .. EBT = = Rs. 15,000 3 · EBIT = 15,000 x 4 = Rs. 60,000 Contribution (ii) DOL = EBIT 5 Contribution 60,000 .. Contribution = 5 x 60,000 = Rs. 3,00,000 = (iii) Variable cost as a percentage of sales = 50% Contribution is Rs. 3,00,000 :: Variable cost is also Rs. 3,00,000 .. Sales = Rs. 6,00,000 27 Illustration 9: From the following information available for four companies, calculate: (i) EBIT (ii) EPS (iii) Operating leverage (iv) Financial leverage ? Q R S Rs. Particulars Sales price per unit Variable cost per unit Quantity Fixed costs Rs. Nos. Rs. Rs. 15 20 25 30 10 15 20 25 20,000 25,000 30,000 40,000 30,000 40,000 50,000 60,000 15,000 25,000 35,000 40,000 40 40 40 40 5000 9000 10,000 12.000 (ICU A/Inter Dec. 1996) Interest Tax rate No. of Equity Shares percent Nos.
