FINANCIAL BBA3301 Profitability and capital structure analysis
Question 5. (15 points total)(Profitability and capital structure analysis)In the year that just ended, Callaway Lighting had sales of $5,470,000 and incurred cost of goods sold equal to $4,460,000. The firm's operating expenses were $128,000 and its increase in retained earnings was $42,000 for the year. There are currently 99,000 common stock shares outstanding and the firm pays a $4.770 dividend per share. The firm has $1,180,000 in interest-bearing debt on which it pays 7.7 percent interest.
a. (5 points) Assuming the firm's earnings are taxed at 35%, construct the firm's income statement.
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Income Statement |
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Revenues |
$ |
5,470,000 |
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Cost of Goods Sold |
4,460,000 |
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Gross Profit |
$ |
|
|
Operating Expenses |
||
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Net Operating Income |
$ |
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|
Interest Expense |
||
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Earnings before Taxes |
$ |
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Income Taxes |
||
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Net Income |
$ |
b. (5 points) Calculate the firm's operating profit margin and net profit margin. (Round to one decimal place.)
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The operating profit margin is |
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% |
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The net income margin is |
% |
-
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Solution: FINANCIAL BBA3301 Profitability and capital structure analysis