Assets:Cash and marketable securities Accounts receivable Inventories Prepaid expensesTotal current assets Fixed assetsLess: accum. depr. Net fixed assetsTotal assetsLiabilities:Accounts payable Notes payable Accrued taxes Total current liabilities Long-term debt Owner’s equityTotal liabilities and owner’s equityNet sales (all credit) Less: Cost of goods soldSelling and administrative expense Depreciation expense Interest expense Earnings before taxesIncome taxes Net incomeCommon stock dividends Common Shares Outstanding$500,000 800,000 1,350,00050,000 $2,700,000 5,000,000(2,000,000) $3,000,000 $5,700,000$400,000 900,000 75,000$1,375,000 1,200,000 3,125,000$5,700,000$8,000,000 (3,500,000) (2,000,000)(250,000) (150,000) 2,100,000(700,000) $1,400,000$500,000 1,000,000Based on the information in Table 4-1, the operating profit margin is:a. 32.4% b. 28.1% c. 17.5% d. 44.8%
Debt Ratio = (1,375,000+ 1,200,00) / 5,700,000= . 452= 45.2% The operating profit margin is the difference between the profit margin and the interest margin. Operating Profit Margin = (2,100,000 + 150,000 ) /8,000,000 =28.1% B is correct according to the option.
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