Jose, a financial expert of Cerione Ltd., analyzes the data given below. What conclusion is he likely to arrive at?
|
Sales
|
$161,000
|
|
Cost of goods sold
|
110,000
|
|
Gross margin
|
$ 51,000
|
|
Total selling and administrative expenses
|
39,500
|
|
Net operating income
|
$ 11,500
|
|
Interest expenses
|
2,170
|
|
Net income before taxes
|
$ 9,330
|
|
Income tax (30%)
|
2,799
|
|
Net income
|
$ 6,531
|
- The company does not have adequate resources to pay the interest due to creditors.
- The company's earnings before interest is the same as its earnings after taxes.
- The company has sufficient resources to pay the interest due to creditors.
- The company's gross margin is 20 percent