Question
Company ABC reported the following financial information for the current year: Total revenue: $5,000,000 Cost of goods sold: $3,000,000 Operating expenses: $1,000,000 Depreciation expense: $100,000
Company ABC reported the following financial information for the current year:
- Total revenue: $5,000,000
- Cost of goods sold: $3,000,000
- Operating expenses: $1,000,000
- Depreciation expense: $100,000
- Interest expense: $50,000
- Tax rate: 30%
- Number of shares outstanding: 500,000
- Market price per share: $10
a) Calculate the company's gross profit margin and operating profit margin. b) Calculate the company's earnings per share (EPS) and price-to-earnings (P/E) ratio. c) Calculate the company's return on assets (ROA) and return on equity (ROE). d) If the company decides to issue 100,000 additional shares and use the proceeds to pay off a $500,000 long-term loan with an interest rate of 5%, how will this affect the company's debt-to-equity ratio? Show all calculations and explain the impact. e) If the company increases its total revenue by 10% and its operating expenses by 5%, how will this affect the company's net profit margin? Show all calculations and explain the impact.
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