Shown here are condensed income statements for two different companies (both are organiz...

Shown here are condensed income statements for two different companies (both are organized as LLCs

and pay no income taxes).

Required

1. Compute times interest earned for Milo Company.

2. Compute times interest earned for Warner Company.

3. What happens to each company’s net income if sales increase by 40%?

4. What happens to each company’s net income if sales increase by 50%?

5. What happens to each company’s net income if sales increase by 80%?

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 30%?

8. What happens to each company’s net income if sales decrease by 40%?

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.