Question
PRO FORMA INCOME STATEMENT ($millions) Total operating revenues 78 Less Expenses 57 Less Depreciation 9 Earnings before interest and taxes 12 Less Interest 2 Net
PRO FORMA INCOME STATEMENT | ($millions) |
Total operating revenues | 78 |
Less Expenses | 57 |
Less Depreciation | 9 |
Earnings before interest and taxes | 12 |
Less Interest | 2 |
Net income before taxes | 10 |
Less taxes @ 10% | 1 |
Net income | 9 |
PRO FORMA BALANCE SHEET | |
Assets: | |
Cash | 9 |
Other current assets | 18 |
Net Fixed Assets | 40 |
Total Assets | 67 |
Liabilities and Equities: | |
Accounts payable | 12 |
long-term debt | 18 |
Stockholders' Equity | 37 |
Total Liabilities & Equities | 67 |
a.
Calculate the following profitability ratios and explain to Andrew and Larry whether the business looks profitable:
i. Profit margin
ii. Return on Assets
Also, explain and calculate the:
iv. Operating cash flow
iii. Return on Equity
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