Problems 1. (Profitability ratios) A firm had the following income statement for last year: Sales Gross profit Operating profit (EBIT) $37,611 20889 16,722 11,483 1575 3,664 1400 2,264 92 Less: Cost of goods sold Less: Operating expenses Less: Depreciation Less: Interest expense Earnings before taxes (EBT) Less: Tax expense Earnings after taxes (EAT) Calculate the firm's a. Gross profit margin ratio b. Operating profit margin ratio c. Pre-tax profit margin ratio d. Net profit margin ratio (Profitability ratios) A financial analyst calculated the following ratios from a firm's income statement 2. Gross profit margin-60% Operating profit margin = 27% Pre-tax profit margin = 14% The firm had sales of $500,000 and paid federal in- come taxes at a 35% rate. a. Reproduce the firm's income statement. b. Calculate the firm's net profit margin ratio. 3. (Rates of return) The firm of Problem 1 finances itself with equal amounts of liabilities and owners' equity Calculate the firm's basic earning power, return on as- sets, and return on equity if its average total assets last year were equal to: a. $5,00 b. $15,000 nt c. $25,000 d. $35,000