Question

Stockholders equity is equal to liabilities plus assets. True False

Answer 1

1.

Assets = Liabilities + Shareholders equity

Shareholders equity = Assets - Liabilities

Hence the statement is false.

Ans is false.

2.

Break-even point in units = Fixed cost/ contribution margin per unit

=$ 95,000/ 3

=31,667 units

Hence the ans is 31,667 units.

3.

Degree of operating leverage (DOL) = (Sale value - Variable Cost) / (Sale value - Variable cost - Fixed cost)

=(20,00,000 - 7,00,000)/((20,00,000 - 7,00,000 -4,00,000)

=13,00,000 / 9,00,000

=1.44 times

Hence the ans is 1.44x .

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