if there is prefrence shares how will be financial leverage will be calculated
as per complier of PE-II, it is
EBIT/(EBIT-INT-PREF. DIV.)
it this correct??
ViveK
(.)
(312 Points)
Replied 01 May 2010
yes it is correct (a small variation is there)
EBIT/EBIT - int - pref div/1-t (this is because these are earnings before tax and there is no tax on pref. div.)
financial leverage shows a relation with change in EBIT and earnings available for equity share holders so there is no doubt regarding this
Kapil
(CA Practice)
(120 Points)
Replied 01 May 2010
Formula is as follows:
EBIT/EBIT-INTT-(PREF. DIVIDENE/(I-TAX))
Here prefernce dividend will only be divided by (1-tax) to make this figure befors tax. because EBIT is earnings before intt & tax. Intt is also deducted before aplying the tax.
LIVE Course on Foreign Exchange Management Act (FEMA)(with recording)
CAclubindia
