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Unformatted text preview: expenses. The company also do not have sufficient financial leverage in their capital structure. The financial leverage is calculated as EBIT / EBIT Interest = 320000 / 304000 = 1.05. Considering the high tax rate of 40% to which the company is subject to, a high financial leverage could be employed by the company to magnify the returns to equity shareholders. But the care should be taken that financial leverage is not too high that they plunge the company into financial distress. The depreciation is also very less which points out to a key factor that either company is using old equipments or not having sufficient assets to support the operations. This might also be hindering the sales because company will not be able to produce as per the market demand....
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This note was uploaded on 11/21/2011 for the course ACC 230 acc 230 taught by Professor Connie during the Spring '11 term at University of Phoenix.
- Spring '11