Foundations Of Finance
10th Edition
ISBN: 9780134897264
Author: KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher: Pearson,
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Chapter 4, Problem 2SP
Summary Introduction
To determine: Net income and operating profits and
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Ecare Berhad has the following income statement items for 2021:
Revenue/Sales
RM4,801,139
Finance costs/Interest expense
RM293,938
Other items of income
RM38,552
Cost of sales (COGS)
RM3,917,144
Income tax expenses
35% of taxable income
Dividend payment
40% of net profit
What is the amount of the firm's earning before tax?
Select one:
a. RM628,609
b. RM590,057
c. RM408,596
d. RM883,995
In 2020, Pennington Corporation had net sales of $600,000 and cost of goods sold of $360,000. Operating expenses were $153,000, and interest expense was $7,500. The corporation’s tax rate is 30%. The corporation declared preferred dividends of $15,000 in 2020, and its average common stockholders’ equity during the year was $200,000.
Instructions
a. Prepare an income statement for Pennington Corporation.
b. Compute Pennington Corporation’s return on common stockholders’ equity for 2020.
In 2016, the Allen Corporation had sales of
$61
million, total assets of
$43
million, and total liabilities of
$15
million. The interest rate on the company's debt is
5.8
percent, and its tax rate is
35
percent. The operating profit margin is
14
percent.
a. Compute the firm's 2016 net operating income and net income.
b. Calculate the firm's operating return on assets and return on equity. (Hint: You can assume that interest must be paid on all of the firm's liabilities.)
Chapter 4 Solutions
Foundations Of Finance
Ch. 4 - Describe the five-question approach to using...Ch. 4 - What are the limitations of industry average...Ch. 4 - What is the difference between a firms gross...Ch. 4 - Prob. 9RQCh. 4 - Prob. 1SPCh. 4 - Prob. 2SPCh. 4 - Prob. 3SPCh. 4 - (Price/ book) Chang, Inc.s balance sheet shows a...Ch. 4 - Prob. 5SPCh. 4 - (Ratio analysis) The balance sheet and income...
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- the Allen Corporation had sales of $ 69 million, total assets of $ 48 million, and total liabilities of $ 15 million. The interest rate on the company's debt is 6.4 percent, and its tax rate is 35 percent. The operating profit margin is 13 percent. a. Compute the firm's 2016 net operating income and net income. b. Calculate the firm's operating return on assets and return on equity.arrow_forwardNightwish Corporation shows the following information on its 2021 income statement: Sales $336,000; Costs = $20,600; Interest expense = $14,200; Taxes = $21,275; Dividends = $21,450. In addition, you're told that the firm issued $7,100 in new equity during 2021 and redeemed $5,400 in outstanding long-term debt. $194,700; Other expenses = $9,800; Depreciation expense = %3D a. What is the 2021 operating cash flow? (Do not round intermediate calculations.) b. What is the 2021 cash flow to creditors? (Do not round intermediate calculations.) c. What is the 2021 cash flow to stockholders? (Do not round intermediate calculations.) d. If net fixed assets increased by $53,200 during the year, what was the addition to NWC? (Do not round intermediate calculations.) a. Operating cash flow b. Cash flow to creditors c. Cash flow to stockholders d. Addition to NWCarrow_forwardIn fiscal year 2021, Walmart Inc. (WMT) reported annual revenue of $572.75 billion, gross profit of $143.75 billion, and net income of $13.67 billion. Costco Wholesale Corporation (COST) had revenue of $195.9 billion, gross profit of $25.25 billion, and net income of $5.01 billion. a. Compare the gross margins for Walmart and Costco. b. Compare the net profit margins for Walmart and Costco. c. Which firm was more profitable in 2021?arrow_forward
- General Accountingarrow_forwarda. Sales for 2018 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciationand amortization were 11% of net fixed assets, interest was $8,575,000, thecorporate tax rate was 40%, and Laiho pays 40% of its net income as dividends. Giventhis information, construct the firm’s 2018 income statement.b. Construct the statement of stockholders’ equity for the year ending December 31, 2018,and the 2018 statement of cash flows.c. Calculate 2017 and 2018 net operating working capital (NOWC) and 2018 free cashflow (FCF). Assume the firm has no excess cash.d. If Laiho increased its dividend payout ratio, what effect would this have on corporatetaxes paid? What effect would this have on taxes paid by the company’s shareholders?e. Assume that the firm’s after-tax cost of capital is 10.5%. What is the firm’s 2018 EVA?f. Assume that the firm’s stock price is $22 per share and that at year-end 2018 the firmhas 10 million shares outstanding. What is the firm’s MVA at year-end 2018?arrow_forwardA company's sales in 2020 were $3.7 million and its total spontaneous assets were $9.7 million. Also in the same year, the firm's spontaneous liabilities consisted of $6.7 million in wages payable, $7.1 million in accounts payable, and $5.9 million in accrued expenses. The firm's profit margin is 5.5% and its dividend payout ratio is 3.1%. The balance sheet at year-end is similar in percentage of sales to that of previous years and this will continue in the future. Required: What is the percentage increase in sales that the company must achieve in order to avoid raising funds externally? Note: The term "k" is used to represent thousands (x $1,000). % (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)arrow_forward
- Roxanne Carter Corporation reported the following for 2020: net sales $1,200,000, cost of goods sold $750,000, selling and administrative expenses $320,000, and an unrealized holding gain on available-for-sale debt securities $18,000. Instructions Prepare a statement of comprehensive income, using (a) the one statement format, and (b) the two statement format. (Ignore income taxes and earnings per share.)arrow_forwardUse the following information for Taco Swell, Incorporated, (assume the tax rate is 24 percent): Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends 2020 $18,549 Cash flow from assets Cash flow to creditors Cash flow to stockholders 2,416 5,890 1,371 1,130 8,696 11,528 1,714 29,180 72,861 6,293 20,492 2,179 2021 $18,888 2,524 6,771 1,198 1,345 9,367 13,602 1,681 35,329 77,730 6,760 21,902 2,354 For 2021, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)arrow_forwardSuppose Torche Corporation has the following revenue and expenses for 2022: Revenues of $9,100,000 Cost of Goods Sold of $2,730,000 Depreciation Expenses of $500,000 Income Taxes of $1,672,000 Interest Expenses of $180,000 Other Expenses of $600,000 Sales, General, & Administrative Expenses of $910,000 Create an income statement with amounts in thousands What is the value of Earnings Before Interest & Taxes?arrow_forward
- A company's sales in 2020 were $3.8 million and its total spontaneous assets were $8.7 million. Also in the same year, the firm's spontaneous liabilities consisted of $8.3 million in wages payable, $8.8 million in accounts payable, and $5.1 million in accrued expenses. The firm's profit margin is 9.7% and its dividend payout ratio is 9.1%. The balance sheet at year-end is similar in percentage of sales to that of prevlous years and this will continue in the future. Required: What is the percentage increase in sales that the company must achieve in order to avoid raising funds externally? Note: The term "k" is used to represent thousands (x $1,000). % (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)arrow_forwardUse the following information for Ingersoll, Incorporated. Assume the tax rate is 24 percent. Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends 2020 $22,549 Cash flow from assets Cash flow to creditors Cash flow to stockholders 2021 $19,128 2,496 2,604 6,290 6,851 1,427 1,238 1,170 1,385 8,736 9,607 11,608 13,842 1,794 1,761 29,420 35,529 73,045 77,970 7,000 21,982 2,434 6,341 20,628 2,579 For 2021, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)arrow_forwardUse the following information for Ingersoll, Incorporated. Assume the tax rate is 21 percent. Sales Depreciation Cost of goods sold Other expenses Interest Cash Accounts receivable Short-term notes payable Long-term debt Net fixed assets Accounts payable Inventory Dividends Cash Accounts receivable Inventory Net fixed assets Current assets Prepare a balance sheet for this company for 2020 and 2021. (Do not round intermediate calculations.) Total assets Assets Current liabilities Liabilities & Equity 2020 2021 $7,616 $8,174 1,094 1,094 2,621 2,975 621 519 510 587 5,058 5,955 725 13,083 15,601 33,490 35,144 4,195 4,068 9,400 9,660 929 1,022 INGERSOLL, INCORPORATED Balance Sheet as of December 31 2020 Total liabilities & owners' equity 3,994 4,387 772 $ 3,994 $ 4,387 9,400 2021 5,058 5,955 9,660arrow_forward
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