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Example1: Lina Firm had operating profits of $150,000, taxes of $11,000, interest expense
of $24,000 and preferred dividends of $8,000. What was the firm's net profit after taxes?
A) $100,000 B) $99,000 C) $44,000 D) $115,000
Example 2: Mahmood Corporation had pretax profits of $1.5 million, an average tax rate of
35 percent, and it paid preferred stock dividends of $52,000. There were 108,000 shares
outstanding and no interest expense. What were Mahmood Corporation's earnings per
share? $8.55
Example1: Lina Corporation had year end 2018 and 2019 retained earnings balances of
$550,000 and $620,000, respectively. The firm reported net profits after taxes of $160,000 in
2019. The firm paid dividends in 2019 of
A) $0. B) $50,000. C) $90,000. D) $110,000.
Example2: Mahmood Corporation had a year end 2019 retained earnings balance of
$270,000. The firm reported net profits after taxes of $80,000 in 2020 and paid dividends in
2020 of $50,000. The firm's retained earnings balance at year end 2020 was
A) $240,000. B) $250,000. C) $270,000. D) $300,000.
Example3: Mahmood Industries, Inc., began 2019 with retained earnings of $25.32 million.
During the year it paid four quarterly dividends of $0.35 per share to 2.75 million common
stockholders. Preferred stockholders, holding 500,000 shares, were paid two semiannual
dividends of $0.75 per share. The firm had a net profit after taxes of $5.15 million. Prepare
the statement of retained earnings for the year ended December 31, 2019.
Solution:
Retained earnings balance (January 1, 2015) $25,320,000
Plus: Net profits after taxes (for 2015) 5,150,000
Less: Cash dividends (paid during 2015)
Preferred stock ($0.75*500000*2) 750,000
Common stock ($0.35*2.75*4) 3,850,000
Total dividends paid (4,600,000)
= Retained earnings balance (December 31, 2015) $25,870,000

35- At the end of 2015, the Long Life Light Bulb Company announced it had produced a
gross profit of $1 million. The company has also established that over the course of this year
it has incurred $345,000 in operating expenses and $125,000 in interest expenses. The
company is subject to a 30 percent tax rate and has declared $57,000 total preferred stock
dividends How much is the earnings available for common stockholders? 314,000
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37- ABC Corp. has liabilities of $18,750, total assets turnover of 1.39 times, return on equity
of 16% and net profit after tax of $5,000. What is the firm’s net profit margin?

a- 9.88 percent b- 8.88 percent c- 7.19 percent d- 10.0 percent

38- A firm has total equity of $571,000 and total liabilities of $214,000. Its return on assets
(ROA) IS 18.7%. What its net profit after tax?
a- $146,795 b- $147,759 c- $149,500 d- $150,000
34- Mahmood company reported net profit after tax $3,000 , if the cost of good sold 0.8 Of
operating expenses if the operating expenses is $50,000 , interest $4,000 , tax 0.50 what is the
amount of sales ?
a- 100,000 b- 120,000 c- 92,000 d- 215,000
39- A firm has total Assets of $571,000 and total liabilities of $214,000. Its return on equity
(ROE) IS 18.7%. What its net profit after tax? $66,759

40- ABC Company has a current ratio of 1.47 and a quick ratio of 0.96, if the firm current
liabilities equals $227,000, then the firm current assets must be? 333690

41- in 2019 ABC company had gross profit margin of 12%, if the cost of goods sold equal to
$242,000,the operating expense is $3,000 and the interest is $15,000 , then the Times interest
earned ratio is? 2 times

45- If a firm has a current ratio of 1.4 a total liabilities of $700,000, and the inventory makes
30% of the firm current assets. The quick ratio would be? 0.98