Glen Mount Furniture Company
Case Three
1. Earnings per share:
Sales…………………………………45,500,000
Less:Fixed Costs…………………….12,900,000
Less: Variable Costs (58% of sales)…26,390,000 (45,500,000 x .58)
Operating Income……………………6,210,000
Less: Interest…………………………1,275,000
Earnings before taxes………………...4,935,000
Less: Taxes (34%)……………………1,677,900 (4,935,000 x .34)
Earnings after taxes…………………..3,257,100
Shares…………………………………2,000,000
Earnings per share…………………….$1.63
2. 1.63 = 104.48 % , Earnings per share increased by 4.48% from 2007 to 2008. 1.56
3. Earnings per share:
Sales…………………………………45,500,000
Less:Fixed Costs…………………….12,900,000
Less: Variable Costs (58% of sales)…26,390,000 (45,500,000 x .58)
Operating Income……………………6,210,000
Less: Interest…………………………2,400,000 (10,000,000 x .1125) + 1,275,000
Earnings before taxes………………...3,810,000
Less: Taxes (34%)……………………1,295,400 (3,810,000x .34)
Earnings after taxes…………………..2,514,600
Shares…………………………………1,375,000
Earnings per share…………………….$1.83
4. 1.83 = 117.31% , Earnings per share increased by 17.31% from 2007 to 2008. 1.56
5. Degree of financial leverage = % Change in EPS % Change in EBIT
4,935,000 = 104.44% or 4.45% 4.48% = DFL : 1.0 for question 1
4,725,000 4.45%
3,810,000 = .81 or 19% change 17.31% = DFL : .91 for question 3
4,725,000 19%
6. Degree of Combined Leverage = Sales – Total Variable Costs Sales- Total Variable Costs – Fixed Costs- Interest
DCL = 45,500,000 - 26,390,000 45,500,000-26,390,000-12,900,000-1,275,000
= 19,110,000 = 3.87 for question 1 4,935,000
DCL = 45,500,000 – 26,390,000 45,500,000 – 26,930,000 - 12,900,000- 2,400,000
= 19,110,000 = 5.02 for question 3 3,810,000
7. Total Debt to Asset Ratio = Total Debt Total Asset
= 17,500,000 = 43.21 % debt to total assets in 2004. 40,500,000
= 27,500,000 = 67.9 %
1. Earnings per share:
Sales…………………………………45,500,000
Less:Fixed Costs…………………….12,900,000
Less: Variable Costs (58% of sales)…26,390,000 (45,500,000 x .58)
Operating Income……………………6,210,000
Less: Interest…………………………1,275,000
Earnings before taxes………………...4,935,000
Less: Taxes (34%)……………………1,677,900 (4,935,000 x .34)
Earnings after taxes…………………..3,257,100
Shares…………………………………2,000,000
Earnings per share…………………….$1.63
2. 1.63 = 104.48 % , Earnings per share increased by 4.48% from 2007 to 2008. 1.56
3. Earnings per share:
Sales…………………………………45,500,000
Less:Fixed Costs…………………….12,900,000
Less: Variable Costs (58% of sales)…26,390,000 (45,500,000 x .58)
Operating Income……………………6,210,000
Less: Interest…………………………2,400,000 (10,000,000 x .1125) + 1,275,000
Earnings before taxes………………...3,810,000
Less: Taxes (34%)……………………1,295,400 (3,810,000x .34)
Earnings after taxes…………………..2,514,600
Shares…………………………………1,375,000
Earnings per share…………………….$1.83
4. 1.83 = 117.31% , Earnings per share increased by 17.31% from 2007 to 2008. 1.56
5. Degree of financial leverage = % Change in EPS % Change in EBIT
4,935,000 = 104.44% or 4.45% 4.48% = DFL : 1.0 for question 1
4,725,000 4.45%
3,810,000 = .81 or 19% change 17.31% = DFL : .91 for question 3
4,725,000 19%
6. Degree of Combined Leverage = Sales – Total Variable Costs Sales- Total Variable Costs – Fixed Costs- Interest
DCL = 45,500,000 - 26,390,000 45,500,000-26,390,000-12,900,000-1,275,000
= 19,110,000 = 3.87 for question 1 4,935,000
DCL = 45,500,000 – 26,390,000 45,500,000 – 26,930,000 - 12,900,000- 2,400,000
= 19,110,000 = 5.02 for question 3 3,810,000
7. Total Debt to Asset Ratio = Total Debt Total Asset
= 17,500,000 = 43.21 % debt to total assets in 2004. 40,500,000
= 27,500,000 = 67.9 %