Complete the following Income Statement for 12/31/2019 with these assumptions which are in no particular order:...

Complete the following Income Statement for 12/31/2019 with these assumptions which are in no particular order:

HINT: Determine revenue as a starting point. If you cannot figure that output in a number and finish based on the rest of the assumptions as this will allow you to receive some points.

1. The company has an Operating Profit Margin of 30%

2. The company has an Account Receivable turnover of 12

3. The Contribution Rate for this company is 40%

4. They have an Interest Coverage ratio of 5

5. All sales for the company were on credit

6. They have a 30% tax rate

7. The account receivable balance as of 12/31/2019 was $7,000,000

Sales

-Fixed Costs

- Variable Costs

EBIT

- Interest

Profit before Tax

- Tax

Net Income

Solutions

Expert Solution

1. Sales = Accounts Receivable * Turnover Ratio

Sales = 7000000 * 12 = $84000000

2. Variable Costs = Sales * (1 - Contribution rate) = 84000000 * 0.60 = $50400000

3. Fixed Costs = Sales * (1 - Operating profit) - Variable Costs = 84000000 * 0.7 - 50400000 = $8400000

4. Interest = Sales * Operating profit / Interest Coverage ratio = 84000000 * 0.30 / 5 = 5040000

jeff jeffy answered 1 year ago

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