Question

(Evaluating profitability​) Last​ year, Stevens Inc. had sales of ​$398,000​, with a cost of goods sold of ​$110,000. The​ firm's operating expenses were $134,000​, and its increase in retained earnings was ​$57,000. There are currently 21,800 common stock shares outstanding and the firm pays a ​$1.61 dividend per share.
a. Assuming the​ firm's earnings are taxed at 34 ​percent, construct the​ firm's income statement.
b. Compute the​ firm's operating profit margin.
c. What was the times interest​ earned?
a. Assuming the​ firm's earnings are taxed at 34 ​percent, construct the​ firm's income statement.  ​(Round to the nearest dollar.​ NOTE: You may input expense accounts as negative​ values.)

Stevens Inc. Income Statement

Sales	398000
Costs of Good Sold	110000
Gross Profits	288000
Operating Expenses	134000
Operating Income (EBIT)
Interest Expense	______
Earnings Before Taxes	_____
Sales	______
Net Income	______

Answer 1

Stevens Inc. Income Statement
Sales	398000.00
Costs of Good Sold	110000.00
Gross Profits	288000.00
Operating Expenses	134000.00
Operating Income (EBIT)	154000.00
Interest Expense	14457.58
Earnings Before Taxes	139542.42
Tax	47444.42
Net Income	92098.00
Less: Dividend	35098.00
Amount transferred to Retained earnings	57000.00

b:Operating margin = EBIT/Sales

= 154000/398000

=38.69%

c: TIE = EBIT/Interest

= 154000/ 14457.58

=10.65

WORKINGS