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XYZ Inc. is a retail company. Below are selected financial data for XYZ Inc. for the years ended December 31, 2021, 2020, and 2019. Description
XYZ Inc. is a retail company. Below are selected financial data for XYZ Inc. for the years ended December 31, 2021, 2020, and 2019.
Description | 2021 | 2020 | 2019 |
Revenue | $2,400,000 | $2,000,000 | $1,600,000 |
Cost of Sales | $1,440,000 | $1,200,000 | $960,000 |
Gross Margin | $960,000 | $800,000 | $640,000 |
Operating Expenses | $384,000 | $320,000 | $256,000 |
Operating Income | $576,000 | $480,000 | $384,000 |
Interest Expense | $120,000 | $100,000 | $80,000 |
Income Before Tax | $456,000 | $380,000 | $304,000 |
Income Tax | $91,200 | $76,000 | $60,800 |
Net Income | $364,800 | $304,000 | $243,200 |
Requirements:
- Prepare a common-size income statement for each year.
- Calculate the Operating Expense Ratio for each year.
- Determine the Interest Coverage Ratio for each year.
- Discuss the company's financial health based on the above ratios.
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