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    Question

    ABC Ltd. has fixed operating costs of ₹50 lakh and

    interest cost of ₹20 lakh. It earned EBIT of ₹80 lakh on sales of ₹200 lakh. Calculate the operating and financial leverage.
    A OL = 2, FL = 1.33 Correct Answer Incorrect Answer
    B OL = 2, FL = 2.0 Correct Answer Incorrect Answer
    C OL = 1.6, FL = 1.33 Correct Answer Incorrect Answer
    D OL = 1.5, FL = 1.5 Correct Answer Incorrect Answer
    E OL = 2.5, FL = 2.0 Correct Answer Incorrect Answer

    Solution

    OL = Contribution/EBIT = (80+50)/80 = 130/80 = 1.625 ; FL = EBIT/EBT = 80/60 = 1.33

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