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Chapter 20
10% decrease in sales
Bat Co Man Co
$m $m
Sales 9.0 9.0
Variable costs (1.8) (3.6)
Fixed costs (4.0) (2.0)
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EBIT 3.2 3.4
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EBIT % change –20% –15%
The higher the operating gearing, the higher the volatility (risk) of profits
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