The following information is available for DEF Company:

• Beginning Inventory: $25,000
• Purchases: $100,000
• Ending Inventory: $20,000
• Sales Revenue: $150,000
• Sales Returns and Allowances: $5,000
• Sales Discounts: $3,000
• Operating Expenses: $30,000

Requirements:

1. Prepare the cost of goods sold statement.
2. Calculate the gross profit.
3. Prepare the income statement.
4. Compute the operating profit margin.
5. Discuss how inventory management could impact the company's profitability.