Answer:
As per the given details, company enjoying the favourable financial leverage can be identified as below:
Company B is in the position of favourable financial leverage as use of debt increases the EPS and thus, the situation is considered as favourable for trading on equity. Particulars Company B (Rs.) Company D (Rs.) Equity @ Rs. 100 each Loan @ 10% p.a. 10,00,000 30,00,000 40,00,000 ??? Total Capital 40,00,000 40,00,000 EBIT 8,00,000 8,00,000 (??) Interest @ 10% (3,00,000) ?? EBT (??) Taxt @ 30% 5,00,000 (1,50,000) 8,00,000 (2,40,000) 3,50,000 5,60,000 EPS 35% 14%
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