Question

Assume a company's income statement for year 12 is as follows: income statement data year 12 (in 000s) net revenues from footwear sales 600,000 cost of pairs sold 370,000 warehouse expenses 55,000 marketing expenses 100,000 administrative expenses 15,000 operating profit (loss) 60,000 interest income (expense) (12,000) pre-tax profit (loss) 48,000 income taxes 14,400 net profit (loss) 33,600 based on the above income statement data and assuming the company has 20 million shares of common stock outstanding, what is the company's operating profit margin and earnings per share (EPS)?

Answer 1

The company's operating profit margin is 10%, which is calculated by dividing the operating profit by net revenues. The earnings per share (EPS) is 1.68 cents, determined by dividing the net profit by the number of shares outstanding.

Step-by-step explanation:

To calculate the operating profit margin, we need to divide the operating profit by net revenues and then multiply by 100 to get a percentage. With the provided data: Operating Profit Margin = (Operating Profit / Net Revenues) x 100 = (60,000 / 600,000) x 100 = 10%.

For earnings per share (EPS), we divide the net profit by the total number of shares outstanding: EPS = Net Profit / Shares Outstanding = 33,600 / 20,000,000 = $0.00168 per share or 1.68 cents per share.