Degree of operating leverage is calculated as:
A. profit divided by contribution margin.
B. break-even sales divided by profit.
C. contribution margin divided by profit.
D. profit divided by break-even sales.
Answer: C
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Pants Corporation acquired 75 percent of Shirt Company's voting shares on January 1, 20X7, at underlying book value. On December 31, 20X7, it also purchased $300,000 par value 9 percent Shirt bonds, which had been issued on January 1, 20X3 to Parry Corporation (unaffiliated with either Pants or Shirt) at a $20,000 premium. The bonds were originally issued with a 10-year maturity and pay interest annually on December 31. During preparation of the consolidated financial statements for December 31, 20X7, the following consolidation entry was included in the consolidation worksheet: Bonds Payable300,000 Bond Premium11,902 Loss on Bond Retirement12,098 Investment in Shirt Company Bonds 324,000Based on the information given above, what price did Pants pay to purchase the Shirt bonds?
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Your company's policy on company vehicles is that no family members may use them or ride in them. It would be unethical to use a company car to drive you and your spouse to a movie
Indicate whether the statement is true or false
Jungle Cat Petting Zoo Inc is currently all equity financed. It used to be leveraged, but it recently issued 5,000 new shares at $50 per share. The proceeds from the new issue were used to repay all of its debt
Financial details for the current and old capital structures are presented in the table below. Assume that Jungle Cat generates perpetual annual EBIT at a constant level. Assume that all cash flows occur at the end of the year and we are currently at the beginning of a year. Assume that taxes are zero. Assume that all of net income is paid out as a dividend. Assume that the debt is perpetual with annual coupons at 3%. Assume that individual investors can borrow and lend at the same interest rate (and with the same terms) as corporations. Leo Delgato is a shareholder in Jungle Cat who owns 6,750 shares. After the new issue, Leo is unhappy with his dividends. How many shares does Leo have to buy (or sell) in order to return his annual cash flows to the level he enjoyed when the company was leveraged? Capital Structure Capital Structure Old (Levered) Current (All-Equity) EBIT $125,000 $125,000 Debt, D $250,000 $0 Cost of Debt, kd 3% N/A Shares Outstanding 45,000 50,000 Stock Price $50.00 $50.00 Dividends per share $2.611 $2.50 A) Buy 750 shares B) Sell 750 shares C) Buy 675 shares D) Sell 675 shares E) Do nothing. The investment cash flows are identical under each capital structure
Describe the criteria for using expert systems