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mash [69]
3 years ago
11

The degree of financial leverage for ABC Inc. is 2.5, and the degree of financial leverage for XYZ Corporation is 1.5. According

to this information, which firm is considered to have greater financial risk?
a. ABC Inc.
b. XYZ Corporation.
c. The degree of financial leverage is not a measure of financial risk, so it is not possible to tell which firm has the greater financial risk given the above information.
d. To determine which firm has the greater financial risk, we need to know the operating income (NOI or EBIT) of each firm. XYZ Corporation would have less financial risk if its operating income is at least twice that of ABC Inc.
e. None of the above is the correct answer.
Business
1 answer:
trapecia [35]3 years ago
7 0

Answer:

a. ABC Inc.

Explanation:

The degree of financial leverage is expressed by the following formula,

= \frac{EBIT}{EBT}

The ratio represents the relationship between net operating profits and profits after financial fixed costs.

Higher the degree of financial leverage, higher will be the financial risk.

In the given case, ABC Inc.'s degree of financial leverage is higher which suggests that ABC has employed more of debt in it's financial structure owing to which higher fixed cost obligations in the form of interest payments have been created.

Thus, ABC Inc. will have a greater financial risk.

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If the margin of safety for canace company was 20%, fixed costs were $1,875,000, and variable costs were 80% of sales, what was
Paraphin [41]

Calculation of amount of actual sales (dollars):

Step-1: Calculation of break-even in sales dollars:

Break-even in sales dollars = Fixed costs / (100%- Variable Cost %)

Break-even in sales dollars = 1875000 /(100%-80%)

Break-even in sales dollars = 1875000 /20%

Break-even in sales dollars = $9,375,000

Step-2: Calculation of actual sales:

Actual Sales = Break-even in sales dollars / (100% -Margin of safety %)

Actual Sales = 9375000 /(100%-20%)

Actual Sales = 9375000 /80%

Actual Sales = $11,718,750

Hence, the Amount of actual sales (dollars) is $11,718,750

6 0
3 years ago
Insurance premiums, entrance fees, train fares, and organization dues are all examples of?.
Phantasy [73]

Insurance premiums, entrance fees, train fares, and organization dues are all examples of price.

<h3>What is price?</h3>

Price is the amount of payment or compensation given by one party to another for a good or service. In some situations, the price of the product has a different name. If an item is a "commodity" in a commercial exchange, the consideration paid for that item is likely to be called its "price."

There are many other types of price. Some of them, like the threshold price, are conceptual. Others relate to the timing of a potential deal or the relative strength of the buyer and seller. However, they all ultimately have something to do with the spot price.

To learn more about price, refer;

brainly.com/question/19091385

#SPJ4

6 0
1 year ago
Suppose you are buying your first condo for $145,000, and you will make a $15,000 down payment. You have arranged to finance the
Crazy boy [7]

Answer:

The monthly payment amount would be $821.69

Explanation:

Hi, since you have already paid $15,000 (down payment), the amount of money to be financed is $130,000 ($145,000 - $15,000). Knowing that, we need to solve the following equation for "A".

PresentValue=\frac{A((1+r)^{n}-1) }{r(1+r)^{n} }

Where:

Present Value = money borrowed (in our case, $130,000)

r = effective interest rate (in our case, 6.5%/12= 0.5417%  or 0.005417)

n = number of periodic payments (in our case, 30*12=360 monthly payments)

Everything should look like this.

130,000=\frac{A((1+0.005417)^{360}-1) }{0.005417(1+0.005417)^{360} }

130,000=A(158.2108195)

Therefore:

A=821.69

So, the monthly payments would be equal to $821.69.

Best of luck.

6 0
2 years ago
What are the costs of "freebie" items
lisov135 [29]

Items may be considered free but the only reason companys are able to make the advertisement of free is the opportunity costs. Nothing is free so for companies to be able to have free products budgets and employee pay cuts must be made.

Hope I helped.


8 0
3 years ago
Read 2 more answers
What type of tax are sales tax and excise tax?
m_a_m_a [10]

Answer:

Indirect tax

Explanation:

Indirect tax are the types of tax that are collected by intermediaries or agents for the person that directly bears the burden on behalf of the government , and eventually remitted to the respective government account.

They are always charged and added to the price of a commodity under a relevant section on the invoice. In this category are sales tax excise tax, service tax and others

6 0
3 years ago
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