Lemon Auto Wholesalers had sales of
a. Compute earnings after taxes.
b. Assume the firm hires Ms. Carr, an efficiency expert, as a consultant. She suggests that by increasing selling and administrative expenses to 14 percent of sales, sales can be increased to
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Foundations of Financial Management
- Scott Healthcare provides a walk-in clinic for its patients and a pharmacy for any medication prescribed by the doctor. Last year, Scott generated total sales of $500,000 and $100,000 in profits.Scott also had average assets of $250,000 for the year. What are Scott Healthcare’s return on sales(ROS), asset turnover (AT), and return on investment (ROI) for the year?arrow_forwardYou are doing some financial analysis research for your work and managed to get (incomplete) data. You will use this data to deduce the required information. You can assume 365 days in a year. a) Alpha Co. reported a cost of goods sold of $64,380.00 and an accounts payable balance of $16,700.00 last year. Compute the average time taken to pay suppliers. Discuss the significance of a longdays’ costs in payables for the firm. b) Bravo Ltd. equity multiplier is 1.93, its total asset turnover is 2.65, and its profit margin is 4.20 percent. Compute the Return on Equity (ROE). Explain the impact on ROE, should the total asset turnover decline next year. c) Charlie Inc. has a profit margin of 7.90 percent, a total asset turnover of 1.54, and a Return on Equity (ROE) of 13.47 percent. Solve for the debt-equity ratio. d) Delta GMBH’s ROE is 8.9 percent. Sales are $2,956,000.00. Total debt ratio is 0.3743. Total debt is $964,000.00. Determine the return on assets (ROA).arrow_forwardManagement would like to achieve a target profit after taxes of $300,000. The company’s income tax rate is 25 percent. What target profit before taxes is required to achieve the $300,000 after-tax?arrow_forward
- Hydro Systems Engineering Associates, Inc. provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 20 percent, and its annual fixed expenses are $120,000. The firm’s income-tax rate is 40 percent.Required:1. Calculate the firm’s break-even volume of service revenue.2. How much before-tax income must the firm earn to make an after-tax net income of $48,000?3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $48,000?4. Suppose the firm’s income-tax rate rises to 45 percent. Explain what will happen to the break-even level of consulting service revenue.arrow_forwardTurtle is the manager of the Home Care Products Division of Care Corporation. As a manager of an investment center, Turtle's performance is measured using the residual income method. For the coming year, Turtle wants to achieve a residual income target of P100,000 using an imputed interest charge of 20%. Other forecasted figures for the coming year are as follows: Working Capital Plant and equipment Costs and expenses P90,000 860,000 1,210,000 How much should revenues be next year to achieve the residual income target? 1,482,000 1,464,000 1,300,000 1,500,000arrow_forwardMBI Incorporated had sales of $35 million for fiscal 2022. The company's gross profit ratio for that year was 26%. Required: a. Calculate the gross profit and cost of goods sold for MBI for fiscal 2022. b. Assume that a new product is developed and that it will cost $469 to manufacture. Calculate the selling price that must be set for this new product if its gross profit ratio is to be the same as the average achieved for all products for fiscal 2022. c. From a management viewpoint, it could use the estimated selling price as a "target" in conducting marketing research studies to assess its ultimate prospects for success at this price. Complete this question by entering your answers in the tabs below. Required A Required B Required C From a management viewpoint, it could use the estimated selling price as a "target" in conducting marketing research studies to assess its ultimate prospects for success at this price.arrow_forward
- Flamengo Co is a sporting goods manufacturing company. Last year, report the following information: Sales S700,000 Cost of goods sold $130,000 Selling and administrative expense $260,000 At the beginning of the year, the value of operating assets was $800,000. At the end of the year, the value of operating assets was $1,200,000. Flamengo- Co. requires a minimum rate of return of 15%. Calculate the Margin. Round all numbers to two decimal places. Do not answer as a percentage. For example, if the Margin is 17.63%, you should type 0.18.arrow_forwardTally Corp. sells tax software to aid individuals in completing their state and federal tax returns. During the current year, 11,000 software packages were sold resulting in $440,000 of sales revenue, $135,000 of variable costs, and $52,000 of fixed costs. If sales increase by $100,000: Total variable costs will Increase/decrease/stay the same by $ Total fixed costs will Increase/decrease/stay the same by $ Operating income will Increase/decrease/stay the same by $arrow_forwardBonaventure Manufacturing expects to earn P210,000 next year after taxes. Sales will be P4million. The firm manufactures a combined bookshelf and desk unit used extensively in university dormitories. These units sell for P200 each and a have variable cost per unit of P150. Bonaventure experiences a 30% tax rate.a. Determine the firm’s fixed costs that are expected next year. (4 marks)b. Calculate the firm’s break-even point in both units and pulas.arrow_forward
- Nkusi Incorporated, provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 20 percent, and its annual fixed expenses are $198,000. The firm’s income-tax rate is 40 percent. Required: Calculate the firm’s break-even volume of service revenue. How much before-tax income must the firm earn to make an after-tax net income of $ 55,800? What level of revenue for consulting services must the firm generate to earn an after-tax net income of $ 55,800 Suppose the firm’s income-tax rate rises to 45 percent. What will happen to the break-even level of consulting service revenue?arrow_forwardHebner Housing Corporation has forecast the following numbers for this upcoming year: Sales = $1,000,000. Cost of goods sold = 600,000. Interest expense = 100,000. Net income = 180,000.The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company’s sales were to increase to $1.5 million, its cost of goods sold would increase to $900,000. The company’s CEO is unhappy with the forecast and wants the firm to achieve a net income equal to $240,000. In order to achieve this level of net income, what level of sales will the company have to achieve? Assume that Hebner’s interest expense remains constant.arrow_forwardJustine is the manager of an investment center. Currently Justine has an ROI of 20%, which is well above the company's average of 15%. The company desires an ROI of new projects to be 12% to be acceptable. Justine's Operating Income is $100,000, and Sales are $1,000,000. What is Justine's Asset Turnover (or Investment Turnover)? Round to the nearest 0.1arrow_forward
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