Operating and Financial Leverage^93
Financial plan A B
Situation II 25,000 25,000
Operation profit 2,000 1,000
Less: Interest on debt 23,000 24,000
PBT
Financial leverage =
Rs. 25,000
Rs. 23 000, =Rs. 25,000
Rs. 24 000, = 1.04= 1.09(iii) Calculation of combined leverages
Combined leverage = Operating Leverage ◊ Financial Leverage
Financial plan A B
Situation I (1.5◊1.07) (1.5◊1.04)
Situation II (1.8◊1.09) (1.8◊1.04)
= 1.96 = 1.87