Based on the information in Table 4-1, the operating profit margin is:(answer is

Question

Based on the information in Table 4-1, the operating profit margin is:(answer is in percentage)
Table 4-1 Garland Company Balance Sheet
Assets:
Cash and marketable securities $500,000
Accounts receivable 800,000
Inventories 1,350,000
Prepaid expenses 50,000
Total current asssets 2,700,000
Fixed assets 5,000,000
Less accum. depr. (2,000,000)
Net fixed assets $3,000,000
Total assets $5,700,000
Liabilities:
Accounts payable $400,000
Notes payable 900,000
Accrued taxes 75,000
Total current liabilities $1,375,000
Long term debt 1,200,000
Owners equity 3,125,000
Total liabilties and owner's equity $5,700,000
Net sales (all credit) $8,000,000
less: cost of goods sold (3,500,000)
Selling and administration (2,000,000)
Depreciation expense (250,000)
Interest expense (150,000)
Earnings before taxes 2,100,000
Income taxes (700,000)
Net income $1,400,000
Common stock $500,000
Common shares Outstanding 1,000,000

Explanation / Answer

DEBT RATIO = (1,375,000+ 1,200,00) / 5,700,000= .452= 45.2%

OPERATING PROFIT MARGIN =EBT + INTEREST /SALES

OPERATING PROFIT MARGIN = (2,100,000 + 150,000 ) /8,000,000 =28.1%

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