Question

1) Bed Bug Inn has annual sales of $237,000. Earnings before interest and taxes is equal to 5.8 percent of sales. For the period, the firm paid $4,700 in interest. What is the profit margin if the tax rate is 34 percent?

A) 0.61 percent

B) –1.87 percent

C) –8.13 percent

D) 2.51 percent

E) –5.29 percent

2) Magnolia LLC has total sales of $911,300, a total asset turnover of 1.1, and a profit margin of 5.87 percent. Currently, the firm has 28,500 shares outstanding. What are the earnings per share?

A) $1.70

B) $0.92

C) $3.86

D) $1.88

E) $1.08

3) Bingo Company has net income of $48,200, sales of $947,100, a capital intensity ratio of .87, and a total equity of $1,000,000. What is its return on equity?

A) 16.78 percent

B) 10.19 percent

C) 7.58 percent

D) 1.93 percent

E) 4.82 percent

Answer 1

1)	Earning before interest and taxes	$       13,746
	($237000*5.8%)
	Less: Interest	$         4,700
	Earning Before Taxes	$         9,046
	Less: Taxes at 34%	$         3,076
	Net Income	$         5,970
	Profit Margin = Net Income / Sales
	= $5970.36/237000
	=2.51 %
2)	Profit Margin = Net Income / Sales
	0.0587 =Net Income/$911300
	net Income =53493.31
	Earning Per Shares = Net Income/ Average Number Of Shares Outstanding
	= $53493.31/28500
	= $ 1.88
3)	Return On Stockholders Equity = Net Income / Average Stockholders Equity
	= $48200/1000000
	=4.82 %