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BRILLIANT’S Leverage Analysis 399

EBIT 2,60,000
Less: Interest (10% of Long-term Debt) 8,000
EBT 2,52,000
Less: Tax @ 50% 1,26,000
EAT 1,26,000

EAT 1,26,000
EPS =  # = ` 21
No. of Equity Shares 6,000
# Equity share capital ÷ Face value of share (i.e. 60,000 ÷ 10 = 6,000)
Calculation of Leverages:

Contribution 3,60,000
Degree of Operating Leverage =   1.38
EBIT 2,60,000

EBIT 2,60,000
Degree of Financial Leverage =  = 1.03
PBT 2,52,000
Degree of Combined Leverage = Operating Leverage × Financial Leverage
= 1.38 × 1.03 = 1.42
Illustration 4.3.9
The following information is available for ABC and Co.:
ABC E§S>$H§$nZr Ho$ {bE {ZåZ{b{IV gyMZm CnbãY h¡…
EBIT ` 11,50,000
Profit before Tax / Q>¡³g Ho$ nhbo àm°{’$Q> ` 5,10,000
Fixed Cost / {’$³ñS> H$m°ñQ> ` 6,00,000
Calculate % change in EPS, if the sales are expected to be increased by 3%.
EPS ‘| % n[adV©Z H$s JUZm H$s{OE, ¶{X goëg 3% ~‹T>Zo H$s Anojm h¡&

Solution:

EBIT 11,50,000
Financial Leverage = 
Profit Before Tax 5,10,000
= 2.25

Contribution
Operating Leverage =
EBIT
Contribution = EBIT + Fixed Cost = 11,50,000 + 6,00,000
= ` 17,50,000