Question

In: Finance

A firm has net sales of $5,500,000, Cost of Goods Sold $3,500,000, Depreciation Expense
of $300,000,...

A firm has net sales of $5,500,000, Cost of Goods Sold $3,500,000, Depreciation Expense
of $300,000, Selling and Administrative Expenses of $500,000, Interest Expense of $200,000, and an average tax rate of 20%.

25. The firm's Net Income is:

  • a. 210,000
  • b. 400,000
  • c. 
700,000
  • d 
800,000

26. The firm's Operating Margin is:

a. 14.0%

b. 21.8%

c. 33.3%


d. 
67.1%

27. firm's Gross Profit Margin is:

a. 21.5%

b. 30.0%

c. 
36.4%

d 
50.0%

28. firm's Pre-taxable Income is:

  • a. 1, 200,000
  • b. 1,000,000
  • c. 800,000
  • d. 500,000

Solutions

Expert Solution

Ans. Particulars Amount
Net sales revenue $5,500,000
Less: Cost of goods sold -$3,500,000
Gross margin $2,000,000
Less: Operating expenses:
Depreciation expenses -$300,000
Selling, general & administrative expenses -$500,000
Operating income (EBIT) $1,200,000
Less: Interest expenses -$200,000
Earnings before tax $1,000,000
Less: Tax ($1,000,000 * 20%) -$200,000
Net income $800,000
Ans. 25 Option   d     $800,000
Ans. 26 Option b     21.8%
Operating margin   = Operating income / Net sales * 100
$1,200,000 / $5,500,000 * 100
21.8%
Ans. 27 Option c    36.4%
Gross profit margin   = Gross profit / Net sales * 100
$2,000,000 / $5,500,000 * 100
36.4%
Ans. 28 Option b     $1,000,000
Pre taxable income =   Earnings before taxes

jeff jeffy answered 2 days ago
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