Page 402 - Corporate Finance PDF Final new link

NPP

402 Corporate Finance BRILLIANT’S

Variable cost unit @ ` 0.70.
Fixed cost : ` 1,00,000.
Interest charges: ` 3,668.
(b) Which combinations of operating and Financial leverage constitute:
(i) Risky Situation and (ii) an Ideal Situation.
[Ans. (a) OL = 4.33, FL=1.14, CL= 4.9]
[Hint: (b) (i) Risky Situation: High operating leverage combined with high financial
leverage will constitute risky situation.
(ii) Normal Situation: One should be high and another should be low, i.e. if
company has a low operating leverage, financial leverage can be higher
and vice-versa.
(iii) Ideal situation: Both should be low.]


""Amn dmo ~Z OmVo h¢ Omo Amn gmoMVo h¢ {H$ Amn h¡&''