2 EVALUATING PROFITABILITY Last year, Davies Inc. had sales of $400,000 with a cost of goods sold of $112,000. The firm's operating expenses were S130,000, and its increase in earnings was $58,000. There are currently 22,000 common stock shares outstanding and the firm pays a $1.60 dividend per share. a. Assuming the firm's earnings are taxed at 34 percent, construct the firm's b. Compute the firm's operating profit margin 4 c. What was the times interest earned? 6 DATA $400,000 112,000 130,000 8,000 9 Operating expenses 10 Increase in retained earnings 22,000 shares 12 Dividend per share 13 Tax rate $1.60 34% 15 SOLUTION 16 income statement 19 Net sales Cost of goods sold 24 Interest expense 26 Tax