Answer to Question #340358 in Management for Akansha

Question

For a business firm leverage is about the fixed operating cost and the fixed finance costs in the cost structure of the firm. For the given details, identify for which firm the degree of operating leverage and degree of financial leverage are higher and why so:

Firms Amrit Baayu

Sales (Rs.) 360000 750000

Variable cost p.u 20 150

Fixed cost (Rs.) 72000 140000

Output (units) 6000 1500

Interest 40000 80000