STU Ltd. has the following financial information for the year ending December 31, 2023:

• Sales Revenue: $800,000
• Cost of Goods Sold: $480,000
• Operating Expenses: $130,000
• Interest Expense: $16,000
• Income Tax Expense: $28,000
• Dividends Paid: $50,000
• Beginning Retained Earnings: $120,000

Requirements:

1. Draft an income statement.
2. Prepare a statement of retained earnings.
3. Calculate the earnings per share if there are 35,000 shares outstanding.
4. Determine the impact of a 5% reduction in sales revenue on net income.
5. Discuss the implications of increasing operating expenses by 15% on the company's profitability.