Suppose Ningbo Steel had sales revenue of $10,000 sales revenue, cost of goods sold of $5,000, operating expenses of $3000, interest expense of $1,000, a tax rate of 20%, and 1,000 shares of common stock outstanding. Based on this information, net profit after tax was:

Question

Quizplus · Accepted Answer

First, we need to find the earnings before interest and taxes (EBIT) by subtracting cost of goods sold and operating expenses from sales revenue:

EBIT = Sales revenue - Cost of goods sold - Operating expenses 
EBIT = $10,000 - $5,000 - $3,000 
EBIT = $2,000

Next, we need to subtract interest expense from EBIT to find earnings before taxes (EBT):

EBT = EBIT - Interest expense 
EBT = $2,000 - $1,000 
EBT = $1,000

Now, we can apply the tax rate of 20% to find the net profit after tax:

Net profit after tax = EBT x (1 - tax rate) 
Net profit after tax = $1,000 x (1 - 0.20) 
Net profit after tax = $1,000 x 0.80 
Net profit after tax = $800

Therefore, the correct answer is C, $800.

Suppose Ningbo Steel Had Sales Revenue of $10,000 Sales Revenue