Assume a company has 10 million shares of stock outstanding and that its Income

Question

Assume a company has 10 million shares of stock outstanding and that its Income Statement for Year 12 is as follows: Income Statement Data Year 12 (in 000s) Net Revenues from Footwear Sales $ 300,000 Cost of Pairs Sold 190,000 Warehouse Expenses 15,000 Marketing Expenses 40,000 Administrative Expenses 8,000 Operating Profit (Loss) 47,000 Interest Income (expenses) (10,000) Pre-tax Profit (Loss) 37,000 Income Taxes 11,100 Net Profit (Loss) $ 25,900 Based on the above income statement data, which of the below statements are false?

a. Interest expenses are 3.3% net revenues   b. Administrative expenses are 3.9% of net revenues c. Warehouse expenses are 5.0% of net revenues d. Cost of pairs sold are 63.3% of net revenues   e. Marketing costs are 13.3% of net revenues

Explanation / Answer

Interest expense as % percentage of net revenue = $10,000,000 / $300,000,000

= 3.3%

Administrative expense as % percentage of net revenue = $8,000,000 / $300,000,000

= 2.7%

Warehouse expense as % percentage of net revenue = $15,000,000 / $300,000,000

= 5.0%

Cost of pairs sold as % percentage of net revenue = $190,000,000 / $300,000,000

= 63.3%

Marketing cost as % percentage of net revenue = $40,000,000 / $300,000,000

= 13.3%

Therefore, option (b) is false.

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