A company has net worth of 5,00,000. Its debt to equity ratio is 2. Interest on debt is 10%. The company earns an operating profit of 4,00,000. Tax…

CA Intermediate · Financial Management and Strategic Management · PYQS · May 2025
A company has net worth of 5,00,000. Its debt to equity ratio is 2. Interest on debt is 10%. The company earns an operating profit of 4,00,000. Tax rate is 30%. What will be the financial leverage of the company?
(A) 1.11
(B) 1.33
(C) 1.43
(D) 1.90

Suggested Answer and Working Notes:

Correct Answer: Option (B)

1.33

Topics: Part-A: Financial Management

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