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    Tutorial 6

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    mint chocolate

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    Tutorial 6

    Uploaded by

    mint chocolate
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    8 views3 pages

    Tutorial 6

    Uploaded by

    mint chocolate

    Copyright:

    © All Rights Reserved
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    Download as xlsx, pdf, or txt
    of 3

    The Cold Experience, Inc.

    Income Statement
    For the Year Ended Dec. 31, 2017 ($ in 000's)

    Sales 20,000,000
    Less: Variable Costs 14,000,000
    Less: Fixed Costs 4,000,000
    Earnings Before Interest and Taxes 2,000,000
    Less: Interest Expense 166,667
    Earnings Before Taxes 1,833,333
    Taxes 733,333
    Net Income 1,100,000

    Less: Preferred Dividends 300,000


    Net Income Available to Common 800,000
    Common Shares Outstanding 1,000,000
    Earnings per Share 0.80

    Assumptions
    Price per unit 2.00
    Unit Sales 10,000,000
    Target EBIT 3,000,000
    Variable Costs as a Percent of Selling Price 1.4 70%
    Tax Rate 40%

    Operating Break-even Point (Units) 6,666,666.67


    Operating Break-even Point (Dollars) 13,333,333.33

    Degree of Operating Leverage 3.0


    Degree of Financial Leverage 1.5
    Degree of Combined Leverage 4.5

    Target level of EBIT 3,000,000.00


    Units needed to reach target EBIT 11,666,666.67
    Kung Food Equipment, Inc.
    Annual Income Statements
    For the Years 2013 to 2017 (U.S. $Millions)
    Dec-17 Dec-16 Dec-15
    Revenue 59,200 49,700 48,300
    Cost of Revenue, Total 41,440 34,790 33,810
    Gross Profit 17,760 14,910 14,490
    Selling/General/Admin. Exp. 9,380 7,955 7,745
    Research & Development Exp. 1,500 1,500 1,500
    Net Operating Income 6,880 5,455 5,245
    Other Income, Net 100 100 100
    EBIT 6,980 5,555 5,345
    Interest Expense 1,400 1,200 1,200
    Pre-tax Income 5,580 4,355 4,145
    Income Tax - Total 2,232 1,742 1,658
    Net Income 3,348 2,613 2,487

    Less: Preferred Dividends 1,500 1,200 1,000


    Net Income Available to Common 1,848 1,413 1,487
    Common Shares Outstanding (M) 1,000 1,000 1,000
    Earnings per Share $ 1.85 $ 1.41 $ 1.49

    Tax Rate 40%

    Leverage Measures Dec-17 Dec-16 Dec-15


    Degree of Operating Leverage 1.27 1.34 1.36
    Degree of Financial Leverage 2.27 2.36 2.16
    Degree of Combined Leverage 2.88 3.17 2.92

    LEVERAGE MEASURE OVER TIME


    3.25 3.17
    2.99 2.92 2.88
    Degree of Leverage

    2.27 2.36 2.27


    2.16
    1.92
    1.56 1.44 1.36 1.34 1.27

    Jan-13 Jan-14 Jan-15 Jan-16 Jan-17


    Years

    Degree of Operating Leverage Degree of Financial Leverage


    Degree of Combined Leverage
    ns)
    Dec-14 Dec-13
    41,700 35,400
    29,190 24,780
    12,510 10,620
    6,755 5,810
    1,500 1,500
    4,255 3,310
    100 100
    4,355 3,410
    1,100 800
    3,255 2,610
    1,302 1,044
    1,953 1,566

    800 500
    1,153 1,066
    1,000 1,000
    $ 1.15 $ 1.07

    Dec-14 Dec-13
    1.44 1.56
    2.27 1.92
    3.25 2.99

    TIME
    3.17
    2.88
    2.36 2.27

    1.34 1.27

    an-16 Jan-17

    Financial Leverage

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