Question

G) See the explanation below to work the problem.

XYZ Company, a 'for-profit' business, had revenues of $12 million in 2016.Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million.

XYZ Company, must pay taxes at a rate of 40 percent of pretax (operating) income.

All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash.

What was XYZ's net income for the year?

H) XYZ Company, a 'for-profit' business, had revenues of $12 million in 2016.Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million.

XYZ Company,must pay taxes at a rate of 40 percent of pretax (operating) income. All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash.What was XYZ's total cash flow?

I) XYZ Company, a 'for-profit' business, had revenues of $12 million in 2016.

Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $1.5 million.XYZ Company, must pay taxes at a rate of 40 percent of pretax (operating) income.All revenues were collected in cash during the year, and all expenses other than depreciation were paid in cash.What was XYZ’s profit margin?

Answer 1

G) Net income = (Revenue - Exepenses - Depriciation) * (1 - Tax rate)

Here,

Revenue = $12 million

Expenses = 75% or revenue = $12 * 75% = $9 million

Depriciation = $1.50 million

Tax rate = 40% or 0.40

Now, put the values into formula,

Net income (in millions) = ($12 - $9 - $1.50) * (1 - 0.40)

Net income (in millions) = $1.50 * 0.60

Net income (in millions) = $0.90 million

H) Total cash flow if details are same

Total cash flow = Net income + Depriciation

Here,

Net income = $0.90 million (as calculated in G)

Depriciation = $1.50 million

Now,

Total cash flow (in millions) = $0.90 + $1.50

Total cash flow (in millions) = $2.40 million

I) Profit margin = Net income / Revenue

(if details are same)

Here,

Net income = $0.90 million as (as calculated in G)

Revenue = $12 million

Now,

Profit margin = $0.90 million / $12 million

Profit margin = 0.0750 or 7.50%