Following information relates to A Ltd. for the year ended 31 st March, 2025: Profit volume ratio 24% Operating leverage 2.00 Financial leverage…

(c) Workings: (a) Financial Leverage = EBIT EBT i.e EBIT - Interest So, 1.5 = EBIT EBIT- 12,000 Or, 1.5 (EBIT – 12,000) = EBIT Or, 0.5 EBIT = 18,000 Or, EBIT = 36,000 (b) Operating Leverage = Contribution EBIT Or, 2 = Contribution 36,000 Or, Contribution = 72,000 Sales = Contribution P/V Ratio = 72,000 0.24 = 3,00,000 (c) Fixed Cost = Contribution – EBIT = 72,000 - 36,000 Or, Fixed cost = 36,000 (i) Income Statements for the year ended 31 st March 2025 Particulars A Ltd. (₹) Sales 3,00,000 Less: Variable cost (76%) 2,28,000 Contribution 72,000 Less: Fixed Cost 36,000 Earnings before interest and tax (EBIT) 36,000 Less: Interest 12,000 Earnings before tax (EBT) 24,000 Less: Tax @ 30% 7,200 Earnings after tax (EAT) 16,800 (ii) Calculation of EPS EPS = Profit after tax No. of Equity Shares = 16,800 1,000 = 16.8 (iii) Calculation of % change in EPS if Sales increase by 5% Degree of Combined Leverage (DCL) = Operating Leverage x Financial Leverage = 2 x 1.5 = 3 Alternatively, solution can be presented in following way: DCL = Contribution EBT = 72,000 24,000 = 3 So, % change in EPS % change in Sales = 3 Or % change in EPS = DCL x % change in Sales = 3 x 0.05 = 0.15 or 15%