In 2010 the easy problem company had net income of 450000, Ask an Expert

Accounting

In 2010 The Easy Problem Company had net income of $450,000 income tax of $80,000 and interest expense of $50,000.

a. Explain how Financial Leverage can be used to the advantage of a business, but also how it can work to it's disadvantage. IE what are the circumstances for each scenario

b. Compute the degree of Financial Leverage if

a. Net income before interest and taxes increases by 10%

b. Net income before interest and taxes declines by 50%

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9951755

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