QUESTION: 1721

The following data are available for a firm for a given year:

Net Sales 21,896
Sales & marketing expenses 4,346
Administrative expenses 2,143
COGS 10,084
Depreciation 967
Interest expense 573
Tax rate 35%
Dividends paid 3,445
Preferred Dividends 897
Average total equity 37,432
Average common equity 26,782
Average total liabilities 18,583

The firm's gross profit margin equals ________.

0.45
0.39
0.24
0.54

Answer(s): D

Explanation:

Gross Profit = 21,896 - 10,084 = 11,812 and
Gross Profit margin = 11,812/21,896 = 0.54 = 54%.

Reveal Solution Next Question

QUESTION: 1722

Under what condition would a firm report marketable securities as a long-term asset?

None of these answers.
When funds are set aside for a specific long-term purpose such as plant expansion.
When the value of a firm's investment in marketable securities is less than cost.
All of these answers.
When a firm maintains excess trading securities.

Answer(s): B

Explanation:

A firm may maintain funds invested in marketable securities that are earmarked for plant expansion, sinking fund payments, or other long-term uses. In these situations many firms would report this portion of its cash, or cash equivalents as long-term because these invested funds are not available in the daily operation of the business.

Reveal Solution Next Question

QUESTION: 1723

A firm's financial statements reveal the following data:

interest coverage ratio 3.6X
interest expense rate 7.2%
depreciation 678
total assets 10,946
total asset turnover 1.46

The firm's operating margin equals ________.

13.84%
23.18%
21.99%
25.93%

Answer(s): C

Explanation:

Interest Coverage = EBIT/interest expense
Operating Profit Margin = EBDIT/Net sales
Interest expense rate = interest expense/total assets
Total Asset turnover = sales/total assets
Therefore, interest expense = 7.2%*10,946 = 788 and EBIT = 3.6*788 = 2,837.
So EBDIT = EBIT + depreciation = 2,837 + 678 = 3,515. Also, net sales = 1.46*10,946 = 15,981. This gives Operating Profit Margin = 3,515/15,981 = 21.99%.

Reveal Solution Next Question

QUESTION: 1724

The following data are available for a firm for a given year:

Net Sales 21,896
Sales & marketing expenses 4,346
Administrative expenses 2,143
COGS 10,084
Depreciation 967
Interest expense 573
Tax rate35%
Dividends paid 3,445
Preferred Dividends 897
Average total equity 37,432
Average common equity 26,782
Average total liabilities1 8,583

In the above example, the firm's operating profit margin equals ________.

0.24
0.35
0.18
0.54

Answer(s): A

Explanation:

Operating Profit Margin = 21,896 - 10,084 - 4,346 - 2,143 = 5,323. (Earnings before depreciation, interest, and taxes as a % of sales; EBDIT). Therefore, Operating Profit Margin = 5,323/21,896 = 0.24.

Reveal Solution Next Question

Free CFA-Level-I Exam Braindumps (page: 431)

QUESTION: 1721

Explanation:

QUESTION: 1722

Explanation:

QUESTION: 1723

Explanation:

QUESTION: 1724

Explanation: