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Assignment On Operating Leverage (Apollo Tyres) : Sangeetha Priya.U 10AB30

This document analyzes the degree of operating leverage (DOL) at Apollo Tyres Limited from 2006 to 2010. It provides financial data on the company's net sales, variable costs, contribution, fixed costs, EBIT, and DOL for each year. The analysis finds that Apollo Tyres' DOL was highest in 2006, indicating that the company had higher operating leverage that year compared to other years. The DOL measures how much EBIT changes relative to a change in sales. A higher DOL means EBIT is more impacted by changes in sales.

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69 views3 pages

Assignment On Operating Leverage (Apollo Tyres) : Sangeetha Priya.U 10AB30

This document analyzes the degree of operating leverage (DOL) at Apollo Tyres Limited from 2006 to 2010. It provides financial data on the company's net sales, variable costs, contribution, fixed costs, EBIT, and DOL for each year. The analysis finds that Apollo Tyres' DOL was highest in 2006, indicating that the company had higher operating leverage that year compared to other years. The DOL measures how much EBIT changes relative to a change in sales. A higher DOL means EBIT is more impacted by changes in sales.

Uploaded by

kaaviya6
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ASSIGNMENT ON

OPERATING LEVERAGE
(APOLLO TYRES)






Sangeetha Priya.U
10AB30
OVERVIEW:
Apollo Tyres Limited is the premier tyre manufacturing company in India. In truck tyres
it has more than 30% market share. The brand XT7 became the largest selling truck tyre in the
country. The vision of the company is to be a leader in the Indian tyre industry and a significant
global player.
The degree of operating leverage (DOL) measures in quantitative terms the extent of
operating leverage. When proportionate change in EBIT as a result of a given change in sales is
more than the proportionate change in sales, operating leverage exists. The greater the DOL, the
higher is the operating leverage. Symbolically,
DOL = (Percentage change in EBIT) / (Percentage change in sales)
DOL should always be greater than 1.
Alternatively, DOL can also be expressed in terms of contribution and profit as
DOL = (Total Contribution) / (EBIT) [Provided at base level]
2010 2009 2008 2007 2006
Sales
Net Sales 5036.56 4070.44 3697.87 3284.28 2613.58

Variable cost

Raw Materials
3196.65 2910.87 2488.47 2343.2 1922.93

Contribution 1839.91 1159.57 1209.4 941.08 690.65

Fixed cost
Power & Fuel Cost 163.47 149.29 134.81 132.68 121.82
Employee Cost 248.9 193.87 208.16 186.58 156.08
Other Manufacturing
Expenses
133.83 102.48 92.96 51.31 41.83
Selling and Administration
Expenses
468.71 332.12 316.1 263.59 209.04


Total fixed cost 1014.91 777.76 752.03 634.16 528.77

EBIT 825 381.81 457.37 306.92 161.88

Degree of Operating Leverage 2.230194 3.037034 2.644249 3.066206 4.266432
Source: (Capitaline Plus)

ANALYSI S:
Percentage change in Net sales = 92.72 %( base level)
Percentage change in Variable cost = 66.28 %( base level)
Percentage change in Fixed cost = 92.04 %( base level)
DOL is higher in the year 2006

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