Response to the following problem:
The Digital Express Company disclosed a net income of $12,000 on revenues of $400,000 for fiscal year ending December 31, 2007. The company had $500,000 of 6% debt outstanding during the year. In addition, the company had depreciation and amortization expenses of $32,000. The company's 2007 tax rate was 40%. The management believes a pro forma disclosure of EBITDA would be useful to investors.
a. Determine EBITDA (Earnings before interest, tax, depreciation and amortization ) for 2007.
b. Determine net income divided by sales and EBITDA divided by sales for 2007.
c. What disclosure must management provide in addition to the pro forma EBITDA calculations?