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Firm A B ЕBIT $150,000 $150,000 Interest expense 20,000 75,000 Income tax 50,000 30,000 Debt 400,000 700,000 Equity 600,000 300,000

Firm A B ЕBIT $150,000 $150,000 Interest expense 20,000 75,000 Income tax 50,000 30,000 Debt 400,000 700,000 Equity 600,000 300,000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Two firms have sales of $1 million each. Other financial information is as
follows (refer to image):

What are the operating profit margins and the net profit margins for these two firms? What are their returns on assets and on equity? Why are they different?

Firm B EBIT $150,000 $150,000 Interest expense 20,000 75,000 Income tax 50,000 30,000 Debt 400,000 700,000 Equity 600,000 300,000
Transcribed Image Text:Firm B EBIT $150,000 $150,000 Interest expense 20,000 75,000 Income tax 50,000 30,000 Debt 400,000 700,000 Equity 600,000 300,000
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