Financial Leverage Excel Template

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Following details are available of XYZ Ltd for the year ended 31/03/2018.

Sales (Rs.) 200000

Variable Cost (Rs.) 100000
Fixed Cost (Rs.) 50000
Interest Cost (Rs.) 10000

EBIT is calculated using the formula given below

EBIT= Sales - Variable Cost - Fixed Cost

EBIT 50000

EBT is calculated using the formula given below

EBT= EBIT - Interest Expenses

EBT 40000

Financial Leverage is calculated using the formula given below

Financial Leverage = EBIT/ EBT

Financial Leverage 1.25

Following are the data related to XYZ Ltd.Extract of Statement of Profit and Loss for the Year ended:

Particulars 31/03/2017 31/03/2018

Sales 500000 800000
Variable Cost 200000 250000
Fixed Cost 100000 150000
EBIT 200000 400000
Interest Cost 50000 75000
Profit Before Tax (PBT) 150000 325000
Tax Expenses 45000 97500
Profit After Tax (PAT) 105000 227500
No of Equity Shares 100000 100000
Earnings Per Share (EPS) 1.05 2.275

% Change in EPS is calculated as:

% Change in EPS 1.167

% Change in EBIT is calculated as:

% Change in EBIT 1

Degree of Financial Leverage is calculated using the formula given below

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

Degree of Financial Leverage 1.167

A firm has Equity Share Capital of Rs.600000 consisting of 6000 shares of Rs.100 each.
The firm now wishes to raise a fund of Rs.400000 for the expansion of its projects.
The fund can be raised through any of the following three sources:

Particulars Plan A Plan B Plan C

No. of Existing Equity Shares 6000 6000 6000
Vale of Existing Equity Shares 600000 600000 600000
No. of Additional Equity Shares 4000 1000 0
Vale of Additiona Equity Shares 400000 100000 0
No. of Debentures 0 3000 4000
Value of Debentures 0 300000 400000

Particulars Plan A Plan B Plan C

EBIT 200000 200000 200000
Less: Interest (10% Debentures) 0 30000 40000
EBT 200000 170000 160000
Less: Income Tax @30% 60000 51000 48000

Earnings Available for Equity Shareholders (EAT) 140000 119000 112000

No of Equity Share (Existing + Additional) 10000 7000 6000

Earnings Per Share (EPS) 14 17 18.66666667
Financial Leverage 1.4 1.7 1.8