Kenny Rogers Roasters recently reported Earnings before Interest and Taxes of $235,600. They have a tax...

Kenny Rogers Roasters recently reported Earnings before Interest and Taxes of $235,600. They have a tax rate of 30%. They also reported $6,034,000 in Sales, $75,600 in Net Income, and $3,496,672 in Total Assets. What is the Basic Earning Power for Kenny Rogers Roasters? (answers are in percentage rounded to two decimals)

Expert Solution

Solution :

Calculation of Basic Earning power (BEP) :

The formula for calculating the Basic earning power is

BEP = Earnings before Interest and Taxes / Total assets

As per the information given in the question we have

Earnings before Interest and taxes = $ 235,600 ; Total Assets = $ 3,496,672 ;

Applying the available information in the formula we have the basic earning power as

= $ 235,600 / $ 3,496,672

= 0.067378

= 6.7378 %

= 6.74 % ( when rounded off to two decimal places )

Thus the Basic earning power ratio is = 6.74 %

jeff jeffy answered 2 years ago

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