FINANCIAL
STATEMENT ANALYSIS 1-19
þ
PROGRESS CHECK 1.2
Directions: Select the correct answer for each question. Check your solution with the
Answer Key on the next page.
6.
Suppose that a company has
N
ET
S
ALES
of $332 million,
I
NTEREST
E
XPENSES
of $16
million,
D
EPRECIATION
of $6 million, $225 million expenses for
L
ABOR AND
M
ATERIALS
, and
A
DMINISTRATIVE
E
XPENSES
of $42 million. What is the
EBIT
for that
company?
_____ a) $43 million
_____ b) $49 million
_____ c) $59 million
_____ d) $65 million
_____ e) $91 million
7.
Use the information in question 6, and apply a tax rate of 40%. What is the
N
ET
I
NCOME
available for distribution to the shareholders of this company?
_____ a) $23.6 million
_____ b) $25.8 million
_____ c) $35.4 million
_____ d) $43.0 million
_____ e) $59.0 million
8.
XYZ Corporation purchases a widget maker for $750,000. The piece of equipment has an
estimated useful life of ten years. Using a straight-line depreciation method, the annual
amount the company can deduct as an
O
PERATING
C
OST
is:
_____ a) $7,500 per year
_____ b) $150,000 per year
_____ c) $1,500 per year
_____ d) $75,000 per year