Use following information to calculate Financial Leverage (FLEV) for Walmart for

Question

Use following information to calculate Financial Leverage (FLEV) for Walmart for 2011:

Calculate Financial Leverage (FLEV) for Walmart for 2011:

A.0.98

B. 0.53

C. 1.27
D. 3.41
E. 0.23

Walmart INCOME STATEMENT 2010 2011 TOTAL REVENUE 421,849 OPERATING EXPENSES 396,307 OPERATING PROFIT (EBIT) 25,542 Non-operating Expenses(Net Interest expense) 2,004 TAXABLE PROFIT (EBT) 23,538 Tax 7,579 NET INCOME FROM CONTINUED OPERATIONS 15,959 BALANCE SHEET 2010 2011 AVERAGE OPERATING ASSETS 162,360 173,137 167,749 NON-OPERATING ASSETS 8,047 7,526 7,787 TOTAL ASSETS 170,407 180,663 175,535 OPERATING LIABILITY 56,040 59,097 57,569 NON-OPERATING LIABILITY 41,719 50,319 46,019 SH EQUITY 72,648 71,247 71,948 TOTAL LIAB + EQUITY 170,407 180,663 175,535

Explanation / Answer

1.Calculation of Financial leverage for Walmart for 2011 :

                              Financial leverage = EBIT/EBT

                                                         = EBIT/EBIT-Interest

                                                         = 25542/25542-2004

                                                         = 25542/23538

                                                         = 1.085

    there are many ways to calculate Financial leverage ratio ,but answers given are not matching with any of the options given here.so im using only one alternative to present here.

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