Question

A) The firm has a gross profit of $100, operating income (EBIT) of $70, taxable income...

A) The firm has a gross profit of $100, operating income (EBIT) of $70, taxable income (EBT) of $65, net income of $45, total assets of $4,000, total equity of $1,200, and total sales of $200. What is net profit margin?

B)The company has net income of $30,000 for the year and paid dividends of $40,000.  At the beginning of the year, the company had common stock of $50,000, paid-in surplus of $60,000, and retained earnings of $70,000. At the end of the year, the firm had total equity of $170,000. What is the amount of the net new equity raised during the year?

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Answer #1

A. The net profit margin is computed as follows:

= Net Income / Total Sales

= $ 45 / $ 200

= 22.5%

B. The amount is computed as follows:

Beginning of year common stock + paid in surplus + retained earnings + Net Income - Dividend + equity raised = End of year equity

$ 50,000 + $ 60,000 + $ 70,000 + $ 30,000 - $ 40,000 + Equity raised = $ 170,000

$ 170,000 + Equity raised = $ 170,000

Equity raised = $ 0

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