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To solve the given problem, we need to calculate three types of leverages:

1. **Operating Leverage** (DOL),
2. **Financial Leverage** (DFL),
3. **Combined Leverage** (DCL).

We are given the following dataTo solve the given problem, we need to calculate three types of leverages:

1. **Operating Leverage** (DOL),
2. **Financial Leverage** (DFL),
3. **Combined Leverage** (DCL).

We are given the following 
- Sales = ₹10,00,000
- Variable Costs = ₹7,00,000
- Fixed Costs = ₹2,00,000
- Debt = ₹5,00,000 at 10% interest rate.

### 1. Contribution:
Contribution is calculated as:
\[
\text{Contribution} = \text{Sales} - \text{Variable Costs}
\]
\[
\text{Contribution} = 10,00,000 - 7,00,000 = 3,00,000
\]

### 2. EBIT (Earnings Before Interest and Taxes):
EBIT is calculated as:
\[
\text{EBIT} = \text{Contribution} - \text{Fixed Costs}
\]
\[
\text{EBIT} = 3,00,000 - 2,00,000 = 1,00,000
\]

### 3. Interest Expense:
Interest on debt is calculated as:
\[
\text{Interest} = \text{Debt} \times \text{Interest Rate} = 5,00,000 \times 0.10 = 50,000
\]

### 4. Operating Leverage (DOL):
Operating leverage is the percentage change in EBIT divided by the percentage change in sales. The formula is:
\[
\text{DOL} = \frac{\text{Contribution}}{\text{EBIT}}
\]
\[
\text{DOL} = \frac{3,00,000}{1,00,000} = 3
\]

### 5. Financial Leverage (DFL):
Financial leverage is the percentage change in net income divided by the percentage change in EBIT. The formula is:
\[
\text{DFL} = \frac{\text{EBIT}}{\text{EBIT} - \text{Interest}}
\]
\[
\text{DFL} = \frac{1,00,000}{1,00,000 - 50,000} = \frac{1,00,000}{50,000} = 2
\]

### 6. Combined Leverage (DCL):
Combined leverage is the product of operating leverage and financial leverage:
\[
\text{DCL} = \text{DOL} \times \text{DFL}
\]
\[
\text{DCL} = 3 \times 2 = 6
\]

### Final Results:
- **Operating Leverage (DOL): 3**
- **Financial Leverage (DFL): 2**
- **Combined Leverage (DCL): 6**

Would you like further details or have any questions?

Here are 5 related questions for further practice:
1. How does a change in fixed costs affect operating leverage?
2. What happens to financial leverage if the firm has no debt?
3. How would a reduction in variable costs influence the combined leverage?
4. Can a firm have a high operating leverage but low financial leverage?
5. How does interest rate variation impact financial leverage?

**Tip:** Higher combined leverage indicates higher risk since both operating and financial risks are amplified.

A firm has sales of ₹10,00,000, variable cost ₹7,00,000, fixed cost of ₹2,00,000, debt of ₹5,00,000 at 10% interest. Evaluate the operating, financial, and combined leverages.

Learn how to evaluate the operating, financial, and combined leverages for a firm with sales of ₹10,00,000, variable cost ₹7,00,000, fixed cost ₹2,00,000, and debt ₹5,00,000 at 10% interest. This problem covers key finance concepts and leverages calculation with detailed formulas and steps.

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