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1) Profitability ratios Dr.Zhivago Diagnostics Corp. income statements for 2010 is given: Sales= $2,000,000 Cost of goods sold= 1,400,000 Gross profit= 600,000 Selling and administrative expense= 300,000 Operating profit= 300,000 Interest expense= 50,000 Income before taxes= 250,000 Taxes= (30%) 75,000 Income after taxes= $ 175,000.

a. find out profit margin for 2010.

b. Suppose in 2011, sales increase by 10 percent and cost of goods sold rises by 20 percent. Firm is able to stay all other expenses the same. Once again, suppose the tax rate of 30 percent on income before taxes. Determine the income after taxes and profit margin for 2011?

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