Please answer all or none. Also, Round properly or will be marked wrong. SM.61 A

Question

Please answer all or none. Also, Round properly or will be marked wrong.

SM.61 A small but growing online retailer, Nile Corporation, has shown impressive growth in sales over the past several years, with sales this past year at $920,000.

a.If the company has a net profit margin of 3 percent, what would its net profit be (in dollars)? (Display your answer as a whole number.)

b.If in the next year the company achieves its revenue growth target of 9 percent, what would its total revenue be? (Display your answer as a whole number.)

c.If in the next year the company achieves its revenue growth target of 9 percent, and assuming its profit margin remained unchanged at 3 percent, what would its total profit be for next year? (Display your answer as a whole number.)

d.If the company achieves its revenue growth target of 9 percent, by how much will revenue increase? (Display your answer as a whole number.)

e.If the company achieves its revenue growth target of 9 percent, by how many dollars will net profit increase? (Display your answer as a whole number.)

f.Using the original revenue number of $920,000, if the company spends 63 percent of its revenue on purchases, what would be its purchasing expense? (Display your answer as a whole number.)

g.Assume that revenues stayed flat (meaning the company did not try to increase sales by the 9 percent target), by what percentage would they have to decrease purchasing expenses to equal the increased profit that would have come from a 9 percent increase to revenues? (Write your answer as a percentage and display your answer to two decimal places.)

Explanation / Answer

(a)

Net profit margin = Net profit / Revenue
or, Net profit = Revenue x Net profit margin = $920,000 x 0.03 = $27,600

(b)

Next year revenue = Present year revenue x 1.09 = $920,000 x 1.09 = $1,002,800

(c)

Net profit of next year = $1,002,800 x 0.03 = $30,084

(d)

Growth in revenue = $1,002,800 - $920,000 = $82,800

(e)

Growth in net profit = $30,084 - $27,600 = $2,484

(f)

Purchasing expenses = $920,000 x 0.63 = $579,600

(g)

Expense before = $920,000 - $27,600 = $892,400
Expense after = $920,000 - $30,084 = $889,916

% reduction in expense = ($892,400 - $889,916) / $892,400 = 0.28%

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