McDonald Company shows the following condensed income statement information for the current year:
|
Revenue from sales |
$3,500,000 |
|
|
Cost of products sold |
1,700,000 |
|
|
Gross profit |
1,800,000 |
|
|
Operating expenses: |
||
|
Selling expenses |
$425,000 |
|
|
General expenses |
350,000 |
775,000 |
|
Operating income |
1,025,000 |
|
|
Other income |
20,000 |
|
|
Interest |
70,000 |
|
|
Operating income before income taxes |
975,000 |
|
|
Taxes related to operations |
335,000 |
|
|
Income from operations |
640,000 |
|
|
Extraordinary loss (less applicable income taxes of $40,000) |
80,000 |
|
|
Income before noncontrolling interest |
560,000 |
|
|
Noncontrolling interest (loss) |
50,000 |
|
|
Net income |
$510,000 |
Required
Calculate the degree of financial leverage.