A small but growing online retailer, Nile Corporation, has shown impressive growth in sales over the past several years, with sales this past year at $763,000.If the company has a net profit margin of 5.5 percent, what would its net profit be (in dollars)? (Display your answer as a whole number.) If in the next year the company achieves its revenue growth target of 7 percent, what would its total revenue be? (Display your answer as a whole number.) If in the next year the company achieves its revenue growth target of 7 percent, and assuming its profit margin remained unchanged at 5.5 percent, what would its total profit be for next year? (Display your answer as a whole number.) If the company achieves its revenue growth target of 7 percent, by how many dollars will revenue increase? (Display your answer as a whole number.) If the company achieves its revenue growth target of 7 percent, by how many dollars will net profit increase? (Display your answer as a whole number.) Using the original revenue number of $763,000, if the company spends 50 percent of its revenue on purchases, what would be its purchasing expense? (Display your answer as a whole number.) Assuming that revenues stayed flat (meaning the company did not try to increase sales by the 7 percent target), by what percentage would they have to decrease purchasing expenses to equal the increased profit that would have come from a 7 percent increase to revenues? (Write your answer as a percentage, and display your answer to two decimal places.)
Question
A small but growing online retailer, Nile Corporation, has shown impressive growth in sales over the past several years, with sales this past year at 763,000, if the company spends 50 percent of its revenue on purchases, what would be its purchasing expense? (Display your answer as a whole number.) Assuming that revenues stayed flat (meaning the company did not try to increase sales by the 7 percent target), by what percentage would they have to decrease purchasing expenses to equal the increased profit that would have come from a 7 percent increase to revenues? (Write your answer as a percentage, and display your answer to two decimal places.)
Solution
Sure, let's break down each part of the question step by step.
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Net Profit Calculation:
- Sales this past year: $763,000
- Net profit margin: 5.5%
- Net profit = Sales × Net profit margin
- Net profit = $763,000 × 0.055
- Net profit = $41,965
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Total Revenue with 7% Growth:
- Current sales: $763,000
- Revenue growth target: 7%
- Total revenue next year = Current sales × (1 + Growth rate)
- Total revenue next year = $763,000 × 1.07
- Total revenue next year = $816,410
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Total Profit Next Year with 7% Growth:
- Total revenue next year: $816,410
- Net profit margin: 5.5%
- Total profit next year = Total revenue next year × Net profit margin
- Total profit next year = $816,410 × 0.055
- Total profit next year = $44,903
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Revenue Increase:
- Total revenue next year: $816,410
- Current sales: $763,000
- Revenue increase = Total revenue next year - Current sales
- Revenue increase = 763,000
- Revenue increase = $53,410
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Net Profit Increase:
- Total profit next year: $44,903
- Current net profit: $41,965
- Net profit increase = Total profit next year - Current net profit
- Net profit increase = 41,965
- Net profit increase = $2,938
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Purchasing Expense:
- Current sales: $763,000
- Percentage spent on purchases: 50%
- Purchasing expense = Current sales × Percentage spent on purchases
- Purchasing expense = $763,000 × 0.50
- Purchasing expense = $381,500
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Percentage Decrease in Purchasing Expenses:
- Increased profit from 7% revenue growth: $2,938
- Current purchasing expense: $381,500
- Required decrease in purchasing expenses = Increased profit / Current purchasing expense
- Required decrease in purchasing expenses = 381,500
- Required decrease in purchasing expenses ≈ 0.0077
- Required decrease in purchasing expenses ≈ 0.77%
So, the answers are:
- Net profit: $41,965
- Total revenue next year: $816,410
- Total profit next year: $44,903
- Revenue increase: $53,410
- Net profit increase: $2,938
- Purchasing expense: $381,500
- Percentage decrease in purchasing expenses: 0.77%
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