Shown here are condensed income statements for two different companies (both are organized as LLCs and pay no income taxes).
Virgo Company | |
Sales | $120,000 |
Variable expenses (50%) | 60,000 |
Income before interest | 60,000 |
Interest expense (fixed) | 45,000 |
Net income | $15,000 |
Zodiac Company | |
Sales | $120,000 |
Variable expenses (75%) | 90,000 |
Income before interest | 30,000 |
Interest expense (fixed) | 15,000 |
Net income | $ 15,000 |
Required
1.Compute times interest earned for Virgo Company.
2.Compute times interest earned for Zodiac Company.
3.What happens to each company’s net income if sales increase by 10%?
4.What happens to each company’s net income if sales increase by 40%?
5.What happens to each company’s net income if sales increase by 90%?
6.What happens to each company’s net income if sales decrease by 20%?
7.What happens to each company’s net income if sales decrease by 50%?
8.What happens to each company’s net income if sales decrease by 80%?
Analysis Component
9.Comment on the results from parts 3 through 8 in relation to the fixed-cost strategies of the two companies and the ratio values you computed in parts 1 and 2.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.