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392 Corporate Finance BRILLIANT’S

EAT 100 1,68,000 100
EBT = = ` 2,40,000
100 Tax Rate (100 30)
EBIT = EBT + Interest = 2,40,000 + 32,000 = ` 2,72,000

Illustration 4.3.3
Given below is Income Statement of a firm: / ZrMo EH$ g§ñWm H$m B§H$‘ ñQ>oQ>‘|Q> {X¶m J¶m h¡…
Particulars Amount
({ddaU) (am{e)
(`)
Sales / {dH«$¶ 9,00,000
Less: Cost of Goods Sold (70% Variable) / ~oMr J¶r dñVwAm| H$s bmJV (70% do[aE~b) 5,00,000

Gross Profit / J«m°g àm°{’$Q 4,00,000
Less: Sales and Administration Exp. (20% Variable)
goëg VWm ES>{‘{ZñQ´>oeZ E³gn|gog (20% do[aE~b) 2,00,000

EBIT 2,00,000
Less: Interest / ã¶mO 50,000
EBT 1,50,000

Calculate: / JUZm H$a|…
(i) Operating Leverage / Am°naoqQ>J crdaoO
(ii) Financial Leverage and / ’$m¶Z|{e¶b brdaoO VWm
(iii) Combined Leverage. / H§$~mB§S> brdaoO

Solution:
Working Note:
1. Calculation of Variable Costs and Fixed Costs.
Particulars Variable Fixed

Cost of goods sold 3,50,000 1,50,000
Sales and Administration Exp. 40,000 1,60,000
3,90,000 3,10,000
2. Calculation of EBIT and EBT

Particulars (`)
Sales 9,00,000
Less: Variable costs 3,90,000