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The following information is available for Star Corporation: 2019 2020 Sales 501,441 611,224...

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Finance

The following information is available for Star Corporation:

2019 2020

Sales 501,441 611,224

Cost of goods sold 255,605 322,742

Selling & Administrative expenses 50,268 65,610

Depreciation 72,158 81,559

Interest 15,687 17,980

Taxes 22,622 25,900

Net income 85,101 97,433

Instructions: A). For each year, calculate the firms gross profit margin, operating profit margin, and net profit margin. Make conclusion on how the firms profitability changed from 2019 to 2020.

B). You and your friend came up with an interesting business idea and you want to legally set up the firm, in which each of you will own 50% of the business. The firm is expected to earn 300,000 before taxes next year. The corporate tax rate is 24% and the personal tax rate is 25%. Assuming that the firm does not retain any earnings, calculate and compare how much spendable income each of you receives if the business is organized as a corporation and a partnership. What other factors should you consider when you decide whether to set up the business as a corporation or partnership?

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