ABC Corporation - Income Statement - FY 2018

Revenue ................................. $ 10,000,000

Cost of Goods Sold ........................ 4,000,000

Gross Profit ................................. 6,000,000

Selling General and Admin ........... 2,000,000

Research and Development ......... 1,000,000

Depreciation ................................... 1,500,000

Operating Expenses ................... 4,500,000

Operating Income ...................... 1,500,000

Interest Income ................................. 200,000

Interest Expense ............................... 300,000

Pre-Tax Income .......................... 1,400,000

Tax ...................................................... 490,000

Net Income ................................. $ 910,000

EPS - Basic ......................................... $ 0.70

Weighted avg. Shares .................... 1,300,000

Use the above information to answer the following four questions:

1. What is ABC's Gross Margin for 2018? A- 15% B- 20% C- 40% D- 60%

2. What is ABC's Operating Margin? A- 9.1%

B- 15.0%

C- 45.0%

60.0%

3. What is ABC's Net Margin? A- 9.1% B- 14.0% C- 15.0% D- 45.0%

4. What is Common Size entry for Research and Development A- 9.1% B- 10.0% C- 15.0% D- 20.0%

5. Use the following ABC Company Balance Sheet for questions 5 

Transcribed Image Text:

Cash S 5,000 Accounts Payble $ 3,000 Accounts Receivable 4,000 Short term notes 2,000 Inventory 12,000 Current portion of LTD 1,000 Other 1,000 Other 1,000 Total Current Assets S 22,000 Total Current Liabilities $ 7,000 PP&E 15,000 Long Term Debt 14,000 Accumulated Depreciation 2,000 Total Liabilities $ 21,000 PP&E, net 13,000 Common Stock 6,000 Retained Earnings 14,000 Goodwill 6,000 Total Stockholder's Equity 20,000 Total Assets S 41,000 Total Liabilities and Equity S 41,000 Cash S 5,000 Accounts Payble $ 3,000 Accounts Receivable 4,000 Short term notes 2,000 Inventory 12,000 Current portion of LTD 1,000 Other 1,000 Other 1,000 Total Current Assets S 22,000 Total Current Liabilities $ 7,000 PP&E 15,000 Long Term Debt 14,000 Accumulated Depreciation 2,000 Total Liabilities $ 21,000 PP&E, net 13,000 Common Stock 6,000 Retained Earnings 14,000 Goodwill 6,000 Total Stockholder's Equity 20,000 Total Assets S 41,000 Total Liabilities and Equity S 41,000

Answer rating: 100% (QA)

Lets analyze each question based on the given information 1 Gross Margin This is the ratio of gross ... View the full answer