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The capital structure of William Corporation limited consists of an ordinary share capital of
Rs.20 lakhs (shares of Rs.100 per value) and Rs.20 lakhs of 10% debentures. The unit sales
increased by 20% from 2,00,000 units to 2,40,000 units, the selling price is Rs.10 per unit,
variable cost amounts to Rs.6 per unit and fixed expenses amount to Rs.2,00,000. The
income tax rate is assumed to be 50%.
You are required to calculate the following:
a. The percentage increase in earnings per share.
b. The degree of financial leverage at 2,00,000 units and 2,40,000 units
c. The degree of operating leverage at 2,00,000 units and 2,40,000 units

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