XYZ Ltd. has an average selling price of Rs 10 per unit; its variable unit costs are Rs. 5 per unit; fixed costs amount to Rs. 1,70,000. It finances all its assets by equity funds. It pays 35 percent...

Extracted text: XYZ Ltd. has an average selling price of Rs 10 per unit; its variable unit costs are Rs. 5 per unit; fixed costs amount to Rs. 1,70,000. It finances all its assets by equity funds. It pays 35 percent tax on its income. ABC Ltd. is identical to XYZ Ltd. except in the pattern of financing. The latter finances its assets 50 percent by equity and 50 percent'by debt, the interest on which amounts to Rs 20,000. Determine the degree of operating, financial and combined leverage at Rs. 7,00,000 sales for both the firms, and interpret the results.