Question

A company has sales of $1,250,000, cost of goods sold of $750,000, depreciation expenses of $250,000 and interest expenses of $55,000. If the company’s tax rate is 34%, what is this firm’s net profit?

Answer 1

Gross Profit = 500,000   (Sales -COGS)

Net Profit = Gross Profit - Indirect exp- Dep)

                 =  500,000-55,000 -250,000

                       =  195,000

Tax = 66,300

Net Profit After TAX = NPBT- Tax

                        = 195,000- 66,300 = 128,700

Explanation:

Sale -Cost of goods Sold = Gross Profit

1,250,000-750,000 = 500,000

Net profit = Gross Profit - Indirect Exp - Depreciation)  

                 =  500,000-55,000 -250,000

                 =  195,000

Tax = 195,000 x 34/100

      = 66,300      

NPAT = NPBT - tax  

195,000-66,300 = 128,700