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Question
ACME, Inc. reported the following income statement for 2009:| Sales | $2,500,000 |
| Variable Costs | 900,000 |
| Fixed Operating Costs | 700,000 |
| EBIT | 900,000 |
| Interest Expense | 200,000 |
| EBT | 700,000 |
| Taxes (30%) | 210,000 |
| Net Income | $490,000 |
| Earnings Per Share | $4.90 |
If ACME's sales next year increase by 20%, ACME's EBIT will increase
A) 20%, showing no operating leverage.
B) 20%, showing no financial leverage.
C) over 35%, due to operating leverage.
D) over 35%, due to operating leverage and financial leverage.
Answer
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