A company is a victim of a $414 million fraud. At that time its profit margin is 10%. How much additional revenue should the company generate in order to recover the effect on net income?
A) $41.4 million
B) $414 million
C) $4.14 billion
D) $41.4 billion

Question

Quizplus · Accepted Answer

Since the company has suffered a $414 million loss, it needs to generate an additional revenue amount equal to this loss in order to recover the effect on net income. Since the profit margin is 10%, this means that every $1 of revenue generates $0.10 of net income. Therefore, the company needs to generate $414 million / 0.10 = $4.14 billion in additional revenue to recover the loss. Option C is the only answer that matches this amount.

A Company Is a Victim of a $414 Million Fraud