Principles of Finance M.D. SELIM. REZA
( Leverage ) ( B,B,A ) & ( M,B,A ) D.P : Accounting
M.N : 01785911142 / 01750279313
Part-B & C
01.The operational data of the Tasfin Company for the year 2003 ate as follows :
Sales (Units) ————————————— 20,000
Unit Selling price ——————————— Tk 10.00
Unit Variable costs ——————————- Tk 4.00
Required : (1) contribution. (2) EBIT. (3) DOL.
[ Ans : (1) 1,20,000 (2) 50,000 (3) 2.40 Times ]
02.The operational data of A-Company are given below :
Initial sales (Unit) ———————————— 30,000
Selling price per unit ——————————— Tk 15
Variable cost per unit ——————————— Tk 9
Fixed cost (Annual) ———————————- Tk 50,000
Requirement : (1) Contribution (2) EBIT (3) DOL.
[ Ans : (1) 1,80,000 (2) 1,30,000 (3) 1.38 Times ]
- The information of Reshma Ltd are as follows:
Sales ——————————————— Tk 8,00,000
Fixed cost —————————————Tk 1,28,000
EBIT ———————————————Tk 1,92,000
You are required to calculate :
(1) Total variable costs. (2) Contribution. (3) Degree of operating Leverage.
04.The information of Reshma Ltd are as follows:
Sales ——————————————— Tk 10,00,000
Fixed cost —————————————Tk 3,80,000
EBIT ———————————————Tk 2,20,000
You are required to calculate :
(1) Total variable costs. (2) Contribution. (3) Degree of operating Leverage.
[ Ans : (1) 4,00,000, (2) 6,00,000, (3) 2.73 Times ]
Principles of Finance
- Shimin corporation gives the following data for calculation of degree of operating leverage.
| Year | EBIT (Tk) | Sales (Unit) |
| 2003 | 5,00,000 | 20,000 |
| 2004 | 6,00,000 | 21,500 |
[ Ans : DOL = 2.67 Times ]
- You have been supplied the following data relating to Bina Co. Ltd.
| Year | EBIT (Tk) | Sales (Unit) |
| 1991 | 1,00,000 | 50,000 |
| 1992 | 2,00,000 | 1,10,000 |
Compute the degree of operating leverage (DOL) [ Ans : DOL = 0.83333 Times ]
Principles of Finance
- Don Co. gives the following data for calculation of degree of financial leverage.
| Year | EBIT (Tk) | EPS (Tk) |
| 1991 | 20,00,000 | 3,000 |
| 1992 | 25,00,000 | 2,300 |
[ Ans : DFL = 1.22 Times ]
- Rena Jut Mills gives the following data for calculation of degree of financial leverage.
| Year | EBIT (Tk) | EPS (Tk) |
| 2018 | 15,00,000 | 1,320 |
| 2019 | 20,00,000 | 2,040 |
[ Ans : DFL = 1.64 Times ]
- Tagar Ltd. Provides the following data from its books of account ended oon 31st Dec-2001.
Sales -60,000 Unit
Selling price @ Tk 15 per unit
Variable cost @ Tk 8 per unit.
Fixed operating cost (Annual ) Tk 2,00,000.
You are required to calculate the Degree of operating leverage. [ Ans : 1.909 Times ]
Principles of Finance
- A Company’s capacity is to produce 20,000 units per year and currently producing and selling 10,000 units. Following information relating to costs and sales are given :
Selling price per unit ——-Tk 90
Variable cost per unit ——Tk 40
Fixed cost ( per year ) —- 2,50,000
Required : What is the Degree of operating leverage ? [ Ans : DOL = 2 Times ]
- Calculate the Financial leverage from the following information :
Sales units ——————- Tk 3,00,000 unit
Variable cost per unit —— Tk 2
Fixed cost ——————- Tk 4,00,000
Interest expenses ———— Tk 30,000
Unit Selling price ———- Tk 5
Required : (1) DOL (2) DFL (3) DTL / DCL
[ Ans :(1) 1.80 Times (2) 1.06 Times (3) 1.91 Times ]
Principles of Finance
- Calculate the Financial leverage from the following information :
Out put ( In units ) ———————Tk 75,000 unit
Fixed cost ——————- Tk 7,00,000
Variable cost per unit —— Tk 7.50
Interest expenses ———— Tk 40,000
Unit Selling price ———- Tk 25
Required : (1) DOL (2) DFL (3) DTL / DCL
[ Ans :(1) 2.14 Times (2) 1.07 Times (3) 2.29 Times ]
- Calculate Operating leverage Financial leverage and Combined leverage for the following firms :
| Particulars | X | Y | Z |
| Out put ( In units )
Fixed cost per unit (Tk) Variable cost per unit (Tk) Interest Expenses (Tk) Unit Selling price (Tk) |
4,00,000
4,00,000 1 35,000 3 |
85,000
7,50,000 7.50 50,000 25 |
6,00,000
90,000 0.10 Nil 0.50 |
Required : (1) DOL (2) DFL (3) DTL / DCL
[ Ans :(1) DOL = (X) 2 Times. (Y) 2.01 Times. (Z) 1.60 Times. (2) DFL = (X) 1.10 Tie
(Y) 1.07 Times (Z) 1 Times (3) DTL / DCL = (X) 2.19 (Y) 2.16 (Z) 1.60 Times ]
Principles of Finance
- Following information are available from the books of accounts of three companies :
| Company | A | B | C |
| Sales in units
Selling price per unit (Tk) Variable cost per unit (Tk) Fixed cost (Tk) Interest charges (Tk) Proposed sales in units |
40,000
20 10 3,00,000 25,000 50,000 |
15,000
40 25 1,25,000 30,000 20,000 |
30,000
25 12 2,40,000 50,000 45,000 |
You are required to calculate the (1) DOL (2) DFL (3) DTL / DCL. You are also required to show and explain the effect of all three leverages. Assume 25% corporate tax rate. [ Ans : (1) DOL = (A) 4 Times (B) 2.25 Times (C) 2.60 (2) DFL = (A) 1.33 Time
(B) 1.42 Times (C) 1.50 (3) DTL / DCL = (A) 5.33 Times (B) 3.21 Times (C) 3.90 ]
15.Following are the data of Square company.
Sales 10,000 units @ Tk 20 per units —————————-Tk 2,00,000
Variable cost @ Tk 10 Tk per unit ——————————- 1,00,000
Contribution ——————————————————- 1,00,000
Fixed cost ( operating ) ——————————————- 40,000
Earning before interest & Tax ( EBIT ) ————————- 60,000
Requirement : What is the Degree of operating leverage ? What is the effect of operating leverage on EBIT if sales increases by 25% and 50%.
[ Ans : DOL = 1.70 Times 25% Changing = 41.67% & 25% Changing = 83.33% ]
Principles of Finance
- Monalisa Ltd provides the following data from its books of account ended 31 December -2002.
Sales ———————————— Tk 70,000 Unit
Selling price per unit —————— 20
Variable cost ————————— 12
Fixed cost ( Annual ) Tk 2,60,000
12% Debt ——————————-Tk 6,00,000
Common stock ( Tk 100 per share ) –Tk 4,00,000
Your are required to calculate the (1) DOL (2) DFL (DTL / DCL. and the effect of leverage if the company plans to increase sales in 2003 by (a)
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