Finman Group2 Assignment Glen Mount

Glen Mount Furniture Company
1.
Sales
Less: Fixed Costs
Less: Variable Costs (58% of Sales)
Operating Income (EBIT)
Less: Interest
Earnings Before Taxes (EBT)
Less: Taxes (34%)
Earnings After Taxes (EAT)
Shares
Earnings Per Share (EPS)

45,500,000.00
12,900,000.00
26,390,000.00
6,210,000.00
1,275,000.00
4,935,000.00
1,677,900.00
3,257,100.00
2,000,000.00
1.63

2.
1999 EPS
2000 EPS
Variance
% Increase in EPS

1.56
1.63
0.07
4.4%

3.
12,000,000 Bonds Payable @ 10.625% Interest
10,000,000 Bonds Payable @ 11.25% Interest
Total Interest
Sales
Less: Fixed Costs
Less: Variable Costs (58% of Sales)
Operating Income (EBIT)
Less: Interest
Earnings Before Taxes (EBT)
Less: Taxes (34%)
Earnings After Taxes (EAT)
Shares
Earnings Per Share (EPS)

1,275,000.00
1,125,000.00
2,400,000.00
45,500,000.00
12,900,000.00
26,390,000.00
6,210,000.00
2,400,000.00
3,810,000.00
1,295,400.00
2,514,600.00
1,375,000.00
1.83

4.
1999 EPS
2000 EPS
Variance
% Increase in EPS

1.56
1.83
0.27
17.3%

Question 1:
% Change in EPS
% Change in EBIT
Degree of Financial Leverage

4.4%
3.5%
127%

5.

Question 3:

% Change in EPS
% Change in EBIT
Degree of Financial Leverage

17.3%
3.5%
493.9%

Question 1:
% Change in EPS
% Change in Sales
Degree of Operating Leverage (DOL)
Degree of Financial Leverage (DFL)
Degree of Combined Leverage (DCL)

4.4%
1.1%
400.0%
127.0%
507.9%

Question 3:
% Change in EPS
% Change in Sales
Degree of Operating Leverage (DOL)
Degree of Financial Leverage (DFL)
Degree of Combined Leverage (DCL)

17.3%
1.1%
1555.8%
493.9%
7684.6%

6.

7.
1999 Balance Sheet:
Total Liabilities
Total Assets
Debt to Asset Ratio

17,500,000.00
40,500,000.00
0.43

1999 Balance Sheet + $10 Million Debt:
Total Liabilities
Total Assets
Debt to Asset Ratio

27,500,000.00
30,500,000.00
0.90

8.
The stock price will increase which will result to capital gains for the stockholders.
Capital gain reflects a financial gain on the investment of the stockholder.

ns for the stockholders.