Firm ABC had operating profits of 200,000, taxes of $16,000, interest expense of $44,000, and preferred dividends of $5,000

Finance Dec 02, 2020

Firm ABC had operating profits of 200,000, taxes of $16,000, interest expense of $44,000, and preferred dividends of $5,000. What was the firm's net profit after taxes? Select one: O a. $150,000 O b. $83.000 O c. $135,000 d. $140,000 Clear my choice

Expert Solution

Interest and taxes are deducted from the operating profit to arrive at net profit. The amount of preferred dividend is not deducted in the calculation of firm's net profit after taxes. Hence, the correct answer is-

$200,000 - taxes - interest expense

= $200,000 - $16,000 - $44,000

= $140,000

Answer = $140,000

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