how does he/ she count the interest rate? a. Income Statement Sales 1230000 Less : Cost of

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how does he/ she count the interest rate?

a.

Income Statement
Sales	1230000
Less : Cost of goods sold	520000
Gross profit	710000
Less : Operating expenses	440000
Earnings before interest and taxes	270000
Less : Interest expense	110000
Earnings before taxes [ Net income / ( 1 - Tax% ) = 120000 / ( 1 - 25% ) ]	160000
Less : Taxes @ 25%	40000
Net income	120000

Working note :

Increase in the retained earnings	50000
(+) Dividend paid [ Common stocks outstanding * Dividend per share = 70000 * 1 ]	70000
Net income	120000

b.

Earnings before interest and taxes	270000
(/) Sales	1230000
Operating profit margin	21.95%

c.

Earnings before interest and taxes	270000
(/) Interest expense	110000
Times interest earned	2.45

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Financial Accounting and Reporting a Global Perspective

Financial Accounting and Reporting a Global Perspective

ISBN: 978-1408076866

4th edition

Authors: Michel Lebas, Herve Stolowy, Yuan Ding

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Posted Date: Jan 29, 2024 07:09 AM

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