Discussion Question
“Suppose you are a loan officer in a bank and Econ Company Limited apply for long term loan in your bank. Your bank is providing the loan to all kinds of businesses . 12% p.a. by analyzing the business and current scenario of the market conditions, you are much confident that the profitability rate of the company will remain same even after debt financing. The profit and loss account of the company shows net income of Rs. 105,000, sales Rs. 4,850,000, interest expense, Rs. 300,000, income tax expense Rs. 5,000 and the gross profit Rs. 4,250,000.
By considering the information given about the profitability of the company:
1. Do you think that Econ Ltd. has the ability to pay fixed cost of borrowings ________ (Yes or NO).
2. What is the current operating profitability rate of the company ______
3. What is the amount of operating expense________
4. What is the amount of operating income______
“Suppose you are a loan officer in a bank and Econ Company Limited apply for long term loan in your bank. Your bank is providing the loan to all kinds of businesses . 12% p.a. by analyzing the business and current scenario of the market conditions, you are much confident that the profitability rate of the company will remain same even after debt financing. The profit and loss account of the company shows net income of Rs. 105,000, sales Rs. 4,850,000, interest expense, Rs. 300,000, income tax expense Rs. 5,000 and the gross profit Rs. 4,250,000.
By considering the information given about the profitability of the company:
1. Do you think that Econ Ltd. has the ability to pay fixed cost of borrowings ________ (Yes or NO).
2. What is the current operating profitability rate of the company ______
3. What is the amount of operating expense________
4. What is the amount of operating income______
Idea Solution:- Shared By Hafiz Salman
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