Question

Please use the following information to answer the next 3 questions.

JCJ Inc. has (NI/EBT ) =  .25

JCJ Inc. has (EBT/EBIT ) =  1

JCJ Inc. has (EBIT/SALES ) =  .80

JCJ Inc. has  an equity multiplier of  3

JCJ Inc. has  a total asset turnover ratio of 1.5

Sales are $500,000

26.        If JCJ Inc. has sales of $100,000, what is JCJ’s Net Income?

1. $100,000
2. $25,000
3. $80,000
4. $20,000
5. None of the above

  

27.     What was JCJ’s interest expense for the year?  If there is not enough information, please let me know.

1. $0
2. $20,000
3. $16,000
4. $4,000
5. None of the above

28.    What was JCJ’s operating expenses?  If there is not enough information, please let me know.

1. $100,000

2. $25,000
3. $80,000
4. $20,000
5. None of the above

Answer 1

Solution:

1.Caculation of Net Income

It is given that EBIT/SALES =0.80,thus EBIT is;

=Sales*0.80

=$100,000*0.80=$80,000

Now,EBT/EBIT =1,thus EBT is;

=$80,000*1=$80,000

Now,it is given that,NI/EBT is equal to 0.25,thus NEt Income(NI) is

=EBT*0.25=$80,000*0.25

=$20,000

Thus correct answer is Option d

2.There is no interest expense for the year as EBT/EBIT is equal to 1

Therefore correct answer is Option a i.e $0.

3.Calculation of Operating expense

We can find the operating expense with ratio of EBIT/Sales.

EBIT/Sales=0.80

EBIT=0.80*Sales

=0.80*$100,000

=$80,000

Thus correct answer is Option b