Question

A company had net income of $40,000, net sales of $300,000, and average total assets of $200,000. Its profit margin and total asset turnover were respectively:

Select one:
a. 13.3%; 0.2.
b. 13.3%; 1.5.
c. 2.0%; 1.5.
d. 1.5%; 0.2.
e. 1.5%; 13.3.

Answer 1

a. 13.3%; 0.2.

Step-by-step explanation:

Profit margin can be expressed as a ratio or a percentage. It is also called the gross profit ratio

The formula for gross margin

= net income/ net sales x 100

= $40,000/ $300,000 x 100

=13.33%

The formula for calculating asset turnover ratio is net sales divide by

average total assets.

=Net sales/ average total sales

=$40,000/$200,000

=0.2