Financial Analysis for Hashim Corporation

  Financial Analysis for Hashim Corporation In order to analyze the financial performance and risk exposure of Hashim Corporation, we will calculate the degree of operating leverage, margin of safety in units, and margin of safety in revenues based on the provided information. Given Information: - Selling Price per Unit: SAR 17 - Variable Cost per Unit: SAR 10 - Total Fixed Costs: SAR 800 - Estimated Sales for the Next Period: 300 units Calculations: a. Degree of Operating Leverage: Degree of Operating Leverage (DOL) = Contribution Margin / Net Income Contribution Margin = Selling Price per Unit - Variable Cost per Unit Contribution Margin = SAR 17 - SAR 10 = SAR 7 Net Income = (Selling Price per Unit - Variable Cost per Unit) * Number of Units Sold - Total Fixed Costs Net Income = (17 - 10) * 300 - 800 = 2,100 - 800 = SAR 1,300 Degree of Operating Leverage = 7 * 300 / 1,300 = 2.31 b. Margin of Safety in Units: Margin of Safety (in Units) = Actual Sales - Break-even Sales Break-even Sales = Total Fixed Costs / Contribution Margin Break-even Sales = 800 / 7 = 114.29 units Margin of Safety (in Units) = 300 - 114.29 = 185.71 units c. Margin of Safety in Revenues: Margin of Safety (in Revenues) = Margin of Safety (in Units) * Selling Price per Unit Margin of Safety (in Revenues) = 185.71 * 17 = SAR 3,157.07 Summary: - Degree of Operating Leverage: 2.31 - Margin of Safety in Units: 185.71 units - Margin of Safety in Revenues: SAR 3,157.07 By understanding these financial metrics, Hashim Corporation can assess its risk exposure, profitability, and the cushion it has in terms of sales volume and revenues to cover fixed costs and generate profits efficiently.        

Sample Answer