Items 1 and 2 are based on the following information:
The following information is available for Rothenberg, Inc.:
|
Balance sheet |
||||
|
Current assets |
$ |
500,000 |
||
|
Property, plant, and equipment |
4,000,000 |
|||
|
Total assets |
$ |
4,500,000 |
||
|
Current liabilities |
$ |
30,000 |
||
|
Long-term debt |
2,500,000 |
|||
|
Common stock |
200,000 |
|||
|
Retained earnings |
1,770,000 |
|||
|
Total liabilities and |
||||
|
stockholders’ equity |
||||
|
$ |
4,500,000 |
|||
|
Budget income information |
100,000 units |
105,000 units |
||
|
Sales |
$ |
3,000,000 |
$3,150,000 |
|
|
Expenses |
(2,800,000) |
(2,850,000) |
||
|
Operating income (EBIT) |
$ |
200,000 |
$ 300,000 |
|
|
Earnings per share (EPS) |
$0.20 |
$1.20 |
||
What is Rothenberg’s degree of operating leverage?
- 1/5
- 10
- 5
- 2/3
What is the degree of financial leverage for Rothenberg, Inc.?
- 10
- 5
- 1/6
- 1/10