The following data are available for a firm for a given year:Net Sales 21,896Sales & marketing expenses 4,346Administrative expenses 2,143COGS 10,084Depreciation 967Interest expense 573Tax rate 35%Dividends paid 3,445Preferred Dividends 897Average total equity 37,432Average common equity 26,782Average total liabilities 18,583The firm's gross profit margin equals ________.
Answer(s): D
Gross Profit = 21,896 - 10,084 = 11,812 andGross Profit margin = 11,812/21,896 = 0.54 = 54%.
Under what condition would a firm report marketable securities as a long-term asset?
Answer(s): B
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.
A firm's financial statements reveal the following data:interest coverage ratio 3.6Xinterest expense rate 7.2%depreciation 678total assets 10,946total asset turnover 1.46The firm's operating margin equals ________.
Answer(s): C
Interest Coverage = EBIT/interest expenseOperating Profit Margin = EBDIT/Net salesInterest expense rate = interest expense/total assetsTotal Asset turnover = sales/total assetsTherefore, 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%.
The following data are available for a firm for a given year:Net Sales 21,896Sales & marketing expenses 4,346Administrative expenses 2,143COGS 10,084Depreciation 967Interest expense 573Tax rate35%Dividends paid 3,445Preferred Dividends 897Average total equity 37,432Average common equity 26,782Average total liabilities1 8,583In the above example, the firm's operating profit margin equals ________.
Answer(s): A
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.
The Income Summary account
The Income Summary account is a temporary account created especially for the closing process and is used only for flowing adjustments and closing entries through.
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