EVALUATING PROFITABILITY of $112,000. The firm's operating expenses were $130,000, and its increase in retained 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 income statement. b. Compute the firm's operating profit margin. c. What was the times interest earned? DATA Sales Cost of goods sold Operating expenses Increase in retained earnings Common stock outstanding Dividend per share Tax rate $400,000 112,000 130,000 58,000 22,000 shares 34% SOLUTION a. Assuming the irm's earnings are taed at 34 percent, construct the firm's income statement. Income Statement: Net sales Cost of goods sold Gross profit Operating expenses Operating income Interest expense Income before taxes Net income b. Compute the firm's operating profit margin Operating profit margin c. What was the times interest earned? Times interest earned Step Start Excel. Download and open the Keown_Martin_Petty_Problem 4-3_Start. workbook named: Important note: All calculations must be shown using cell references, Do NOT enter absolute numbers in the cells. In cell B19, input the net sales amount. In cell B20, input the cost of goods sold amount. Note: The output of the expression or function you typed in this cell is expected as a positive number 4 In cell B21, calculate the gross profit. In cell B22, input the operating expenses. Note: The output of the expression or function you typed in this cell is expected as a positive number In cell B23, calculate the operating income. In cell B27, calculate the net income by adding the product of the dividend per share, cell 7 B12, times the number of common stock outstanding, cell B11, and the increase in retained earninqs, cell B10. In cell B25, calculate the income before taxes amount by dividing the net income, cell B27 by 1 minus the tax rate, cell B13. In cell B24, calculate the interest expense amount by subtracting the income before taxes, cell B25, from the operating income, cell B23. Note: The output of the expression or function you typed in this cel is expected as a positive number In cell B26, calculate the tax amount by subtracting the net income, cell B27, from the 10 income before taxes, cell B25. Note: The output of the expression or function you typed in this cell is expected as a positive number Step Instructions In cell B31, calculate the operating proft margin by dividing the operating income, cell B23, by the net sales, cell B19 In cell B35, calculate the times interest earned by dividing the operating income, cell B23, by the interest expense, cell B24. 12 13 Save the workbook. Close the workbook and then exit ExcelSubmit the workbook as directed
