Ricardo Entertainment recently reported the following income statement:
Sales $12,000,000
Cost of goods sold 7,500,000
EBIT 4,500,000
Interest 1,500,000
EBT 3,000,000
Taxes (40%) 1,200,000
Net income $ 1,800,000
The company's CFO wants to see a 25% increase in net income over the next year; she has made the following observations:
Ricardo's operating margin (EBIT/Sales) was 37.5% this year, and is expected to increase to 40% next year.
Ricardo's interest expense and tax rate are expected to remain constant.
What is the percentage sales increase the company needs in order to meet the CFO's target?
