temporary current assets of a firm are financed with longt 5. A be carried by a

Question

temporary current assets of a firm are financed with longt 5. A be carried by a company. current asset i nvestment policy calls for relatively large amounts of current assets to a. relaxed b. restricted c. moderate d. lean-and-mean e. precautionary 6. Trident Food Corporation generated the following income statement for the most recent fiscal year: Sales revenues Variable cost of sales Gross profit Fixed operating costs Net operating income (EBIT) Interest Earnings before taxes $150,000 (112.500) 37,500 24,000) 13,500 (10,000) 3,500 (1400) 2,100 Taxes (40%) Net income Which of the following is the degree of total leverage for Trident Foods? a. 42.86x b. 10.71x c. 71.43x d. 17.86x e. 6.43x

Explanation / Answer

5. A , Relaxed current asset investment policy

6. Degree of Total Leverage = Gross Profit/ EBT = 37500/3500 = 10.71 So answer is b 10.71

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