(Related to Checkpoint 4.3) (Profitability analysis) Last year the P. M. Postem Corporation had sales of $421,000, with a cost of goods sold of $111,000. The firm's operating expenses were $127,000, and its increase earnings was $80,070. There are currently 24,000 shares of common stock outstanding, the firm pays a $1.62 dividend per share, and the firm has no interest-bearing debt. retaine a. Assuming the firm's earnings are taxed at 35 percent, construct the firm's income statement. b. Compute the firm's operating profit margin. a. Assuming the firm's earnings are taxed at 35%, construct the firm's income statement. Complete the income statement below: (Round to the nearest dollar.) Income Statement Revenues Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income Interest Expense Earnings before Taxes $ Income Taxes Net Income 2$

(Related to Checkpoint 4.3) (Profitability analysis) Last year the P. M. Postem Corporation had sales of $421,000, with a cost of goods sold of $111,000. The firm's operating expenses were $127,000, and its increase earnings was $80,070. There are currently 24,000 shares of common stock outstanding, the firm pays a $1.62 dividend per share, and the firm has no interest-bearing debt. retaine a. Assuming the firm's earnings are taxed at 35 percent, construct the firm's income statement. b. Compute the firm's operating profit margin. a. Assuming the firm's earnings are taxed at 35%, construct the firm's income statement. Complete the income statement below: (Round to the nearest dollar.) Income Statement Revenues Cost of Goods Sold Gross Profit Operating Expenses Net Operating Income Interest Expense Earnings before Taxes $ Income Taxes Net Income 2$

Name: (Related to Checkpoint 4.3) (Profitability analysis) Last year the P.
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Description: (Related to Checkpoint 4.3) (Profitability analysis) Last year the P. M. Postem Corporation had sales of $421,000, with a cost of goods sold of $111,000. The firm's operating expenses were $127,000, and its increase in retainedearnings was $80,070.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 3P

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Macon Mills is a division of Bolin Products. Inc. During the most recent year, Macon had a net income of $40 million. Included in the income was interest expense of $2,800,000. The companys tax rate was 40%. Total assets were $470 million, current liabilities were $104,000,000, and $72,000,000 of the current liabilities are noninterest bearing. What are the invested capital and ROI for Macon?
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For a recent year, OfficeMax and Staples are two companies competing in the retail office supply business. OfficeMax had a net income of 34,894,000, while Staples had a net loss of 210,706,000. OfficeMax had preferred stock of 28,726,000 with preferred dividends of 2,123,000. Staples had no preferred stock. The average outstanding common shares for each company were as follows: a. Determine the earnings per share for each company. Round to the nearest cent. b. Evaluate the relative profitability of the two companies.
Lucas Hunter, president of Simmons Industries Inc., believes that reporting operating cash flow per share on the income statement would be a useful addition to the companys just completed financial statements. The following discussion took place between Lucas Hunter and Simmons controller, John Jameson, in January, after the close of the fiscal year: Lucas: Ive been reviewing our financial statements for the last year. I am disappointed that our net income per share has dropped by 10% from last year. This wont look good to our shareholders. Is there anything we can do about this? John: What do you mean? The past is the past, and the numbers are in. There isnt much that can be done about it. Our financial statements were prepared according to generally accepted accounting principles, and I dont see much leeway for significant change at this point. Lucas: No, no. Im not suggesting that we cook the books. But look at the cash flow from operating activities on the statement of cash flows. The cash flow from operating activities has increased by 20%. This is very good newsand, I might add, useful information. The higher cash flow from operating activities will give our creditors comfort. John: Well, the cash flow from operating activities is on the statement of cash flows, so I guess users will be able to see the improved cash flow figures there. Lucas: This is true, but somehow I think this information should be given a much higher profile. I dont like this information being buried in the statement of cash flows. You know as well as I do that many users will focus on the income statement. Therefore, I think we ought to include an operating cash flow per share number on the face of the income statementsomeplace under the earnings per share number. In this way, users will get the complete picture of our operating performance. Yes, our earnings per share dropped this year, but our cash flow from operating activities improved! And all the information is in one place where users can see and compare the figures. What do you think? John: Ive never really thought about it like that before. I guess we could put the operating cash flow per share on the income statement, underneath the earnings per share amount. Users would really benefit from this disclosure. Thanks for the ideaIll start working on it. Lucas: Glad to be of service. How would you interpret this situation? Is John behaving in an ethical and professional manner?
Income Statement Ratio The income statement of Holly Enterprises shows operating revenues of $134,800, selling expenses of $38,310, general and administrative expenses of $36,990, interest expense of $580, and income tax expense of $13,920. Hollys stockholders equity was $280,000 at the beginning of the year and $320,000 at the end of the year. The company has 20,000 shares of stock outstanding at the end of the year. Required Compute Hollys profit margin. What other information would you need in order to comment on whether this ratio is favorable?
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