The CEO of Tom and Sue's Wants the Company to Earn

question 58

Multiple Choice

The CEO of Tom and Sue's wants the company to earn a net income of $3.25 million in 2014. Cost of goods sold is expected to be 60 percent of net sales, depreciation expense is $2.9 million, interest expense is expected to increase to $1.050 million, and the firm's tax rate will be 30 percent. Calculate the net sales needed to produce net income of $3.25 million.

• A)$26.02 million
• B)$29.36 million
• C)$21.48 million
• D)$28.25 million

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Definitions:

Fair Value Through Profit

A financial accounting treatment where changes in fair value of assets or liabilities are recorded in the profit or loss for the period.

Short-Term Investments

Investments that are expected to be converted into cash within one year and are often seen in the form of stocks, bonds, or certificates of deposit held by a company.

Trading Investment

Securities purchased by a company not for long-term holding but rather for generating profit from short-term price fluctuations.