Question

The Malia Corporation had sales in 2019 of $64 million, total assets of $42 ​million, and total liabilities of $ 21 million. The interest rate on the​ company's debt is 6.6 percent and its tax rate is 21 percent. The operating profit margin was 12 percent. What were the​ company's operating income and net​ income? What was the operating return on assets and return on​ equity? Assume that interest must be paid on all of the debt.

Answer 1

1. Operating Income:

2. Interest to be paid:

3.Net Income:

4.Operating return on assets:

5. Return on Equity:

Equity = Assets - Liabilities, therefore,

Tabular method:

Particulars	$
Sales	64,000,000
Operating Margin	12%
Operating Income	7,680,000
Less: Interest	1,386,000
Income before Tax	6,294,000
Less: Tax at 21%	1,321,740
Net Income	4,972,260
Total Assets	42,000,000
Total Liabilities	21,000,000
Operating Return on Assets	18.29%
Return on Equity	23.68%

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