Question

(Evaluating profitability​) Last​ year, Stevens Inc. had sales of $396,000​, with a cost of goods sold of 115,000.

The​ firm's operating expenses were $126,000​, and its increase in retained earnings was $50,000.

There are currently 21,000 common stock shares outstanding and the firm pays a$1.56 dividend per share.

a. Assuming the​ firm's earnings are taxed at 34 percent, construct the​ firm's income statement.

b. Compute the​ firm's operating profit margin.

c. What was the times interest​ earned?

a. Assuming the​ firm's earnings are taxed at 34 percent, construct the​ firm's income statement.  ​(Round to the nearest dollar.​ NOTE: You may input expense accounts as negative​ values.)

Stevens Inc. Income Statement
Net sales	$
cost of goods sold
Gross profits	$
Operating Expenses
Operating income (EBIT)	$
Interest Expense
Earnings before taxes	$
Income Taxes
Net income	$

The operating profit margin is ______%

The times interest earned ratio is____X

Answer 1

A.Income Statement

Stevens Inc. Income Statement
Net sales	$	396,000
cost of goods sold		115,000
Gross profits	$	281,000
Operating Expenses		126,000
Operating income (EBIT)	$	155,000
Interest Expense		29,606
Earnings before taxes	$	125,394
Income Taxes		42,634
Net income	$	82,760

Net Income = Dividend Paid + Retained Earnings

= 21,000*1.56 + 50,000

= $82,760

Income taxes = 82,760*34%/66% = $42,634

b.Operating Profit Margin = Operating Profit/Sales

= 155,000/396,000

= 39.14%

C.Times interest earned = EBIT/Interest

= 155,000/29,606

= 5.24 times