A Summarized Income Statement for Leveraged Inc The Degree of Financial Leverage Is:
A)$150,000/$30,000
B)$150,000/$120,000
C)$1,000,000/$400,000
D)$150,000/$80,000

A summarized income statement for Leveraged Inc.is presented below. $\begin{array}{llcc} \text {Sales } & \$1,000,000 \\ \text { Cost of Sales } &\underline{600,000}\\ \text { Gross Profit } &\$400,000\\ \text {Operating Expenses } &\underline{250,000}\\ \text {Operating Income } &\$150,000\\ \text { Interest Expense } &\underline{30,000}\\ \text {Earnings Before Tax } &\$120,000\\ \text { IncomeTax } &\underline{40,000}\\ \text { Net Income } &\underline{\underline{\$80,000}}\\\end{array}$

The degree of financial leverage is:

A) $150,000/$30,000
B) $150,000/$120,000
C) $1,000,000/$400,000
D) $150,000/$80,000
E) $400,000/$120,000

Correct Answer:

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