Question

The Johnson Materials Inc. has an EBIT of $2,000,000. Its Times Interest Earned (TIE) ratio is 4, Profit Margin is 10% and the tax rate is 25%. Costs of Goods Sold (COGS) is $5.5 million. Develop an income statement by filling in the blanks in the following table (35 points).

Hint: You will begin with sales and end with NI; start with EBIT.

Note: Round your answers to the nearest dollar, and DO NOT USE COMMA in your answer. E.g., 16,666.6 should be rounded to and typed in as 16667.

Income Statement:

Sales	=  (Note: Do not use comma in your answer)
COGS	5500000
EBITDA	=  (Note: Do not use comma in your answer)
Depreciation&Amortization	=  (Note: Do not use comma in your answer)
EBIT	2000000
Interest Expense	=  (Note: Do not use comma in your answer)
EBT	=  (Note: Do not use comma in your answer)
Tax	=  (Note: Do not use comma in your answer)
Net Income	=  (Note: Do not use comma in your answer)

Answer 1

1)

Times Interest Earned (TIE) ratio = EBIT / Interest expense

4 = 2,000,000 / Interest expense

Interest expense = 500000

2)

EBT = EBIT - interet expense

EBT = 2,000,000 - 500,000

EBT = 1500000

3)

Tax = EBT * tax rate

Tax = 1,500,000 * 25%

Tax = 375000

4)

Net income = EBT - tax

Net income = 1,500,000 - 375,000

Net income = 1125000

5)

Proft margin = Net income / sales

0.1 = 1,125,000 / Sales

Sales = 11250000

6)

EBITDA = Sales - COGS

EBITDA = 11,250,000 - 5,500,000

EBITDA = 5750000

7)

Depreciation & Amortization = EBITDA - EBIT

Depreciation & Amortization = 5,750,000 - 2,000,000

Depreciation & Amortization = 3750000