A firm has sales of $2,000,net income of $125,total assets of $1,100,and total equity of $750.Interest expense is $75.What is the common-size statement value of the interest expense?

Question

Quizplus · Accepted Answer

To calculate common-size statement value of interest expense, we need to divide interest expense by either sales or total assets. 
Using sales: Interest expense / Sales = 75 / 2000 = 0.0375 = 3.75%
Using total assets: Interest expense / Total assets = 75 / 1100 = 0.0682 = 6.82%
Therefore, the closest option is B) 3.75%.

A Firm Has Sales of $2,000,net Income of $125,total Assets