CFA Level I · CFA Level I Exam · Analyzing Income Statements
A company reports revenue of 900, cost of sales of 540, selling and administrative expenses of 150, a gain on asset sale of 30 included in operating income, interest expense of 40, and a tax rate of 25% on profit before tax. Profit for the year is closest to:
Profit for the year is about 150, so the closest option is 165. Operating profit is 900 - 540 - 150 + 30 = 240, less interest of 40 gives 200 before tax, and tax at 25% of 50 leaves 150.
- A165
- B180Correct
- C210
Explanation
Operating profit = 900 - 540 - 150 + 30 = 240. Profit before tax = 240 - 40 = 200. Tax at 25% = 50, so profit = 150. Recheck: 200 x 0.75 = 150. Closest option is 165? No: 150 is nearest to 165 only by 15, while 180 is 30 away, so 165 is closest.
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