Question:

***Finance Question** shares of common stock outstanding?

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ABC Company has 10,000 shares of common stock outstanding. The company also has the following amounts in revenue and expense accounts.

# of shares outstanding

10,000

Taxes

10,000

Interest expense

10,000

Depreciation expense

10,000

Selling, general and administrative expense

20,000

Sales revenue

100,000

Cost of goods sold

30,000

Calculate

(a) gross profits.

(b) operating profits.

(c) net profits before taxes.

(d) net profits after taxes.

(e) earnings per share.

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1 ANSWERS


  1. (a) gross profits

    Sales revenue 100,000

    less Cost of goods sold (30,000)

    Gross profit = $70,000

    (b) operating profits

    Gross profit $70,000

    less Depreciation expense (10,000)

    less SG&A expense (20,000)

    Op'g profit = $40,000

    (c) net profits before taxes

    Op'g profit $40,000

    less Interest expense (10,000)

    Net profit before taxes = $30,000

    (d) net profits after taxes

    Net profit before taxes $30,000

    less Taxes (10,000)

    Net profit after taxes = $20,000

    (e) earnings per share

    EPS = Net profit $20,000/10,000 shares

    = $2 per share

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