1) What are financial markets? What function do they perform? How would an economy be worse off without them?
2) Distinguish between the money and capital markets.
3) What major benefits do corporations and investors enjoy because of the existence of organized security exchanges?
4) You are a hard-working analyst in the office of financial operations
for a manufacturing firm that produces a single product. You have developed the following cost
structure information for this company. All of it pertains to an output level of 10 million units.
Using this information, find the break-even point in units of output for the firm.
Return on operating assets ??25%
Operating asset turnover ??5 times
Operating assets ??$20 million
Degree of operating leverage ??4 times
1) Compute the operating profit margin:
2) Compute the sales level associated with the given output level:
3) Compute EBIT:
4) Compute revenue before fixed costs. Since the degree of operating leverage is 4 times, revenue before fixed costs (RBF) is 4 times EBIT as follows:
5) Compute total variable costs:
6) Compute total fixed costs:
7) Find the selling price per unit, and the variable cost per unit:
8) Compute the breakeven point:
5) Allison Radios manufactures a complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for these same units is $126. Allison Radios incurs fixed costs of $540,000 per year.
a. What is the break-even point in units for the company?