Question

Dulaney's Stores has posted the following yearly earnings and expenses. Click the icon to view the yearly data.

Earnings and Expenses (Year Ending January 2012)
Sales $96,000,000
Cost of goods sold (COGS) $91,000,000
Pretax earnings $9,312,000

Selected Balance Sheet Items
Merchandise Inventory $4,656,000
Total assets $7,000,000

a. Dulaney's current profit margin is 9.7 %. (Enter your response rounded to one decimal place.)
Dulaney's current yearly ROA is 133.0 %. (Enter your response rounded to one decimal place.)

Answer 1

To calculate a firm's profit margin, divide the net earnings by total sales and express it as a percentage. The example given shows an accounting profit of $50,000 when sales revenue was $1 million, and expenses totaled $950,000.

Step-by-step explanation:

The subject matter in question pertains to calculating profit margins and return on assets (ROA) for a business using given financial data. To determine the profit margin, we would divide the business's net earnings by its total sales and express the result as a percentage. However, there is a discrepancy in the question as the provided pretax earnings cannot derive from the stated sales and cost of goods sold. Assuming this is a hypothetical scenario and using separate information provided, if a firm had sales revenue of $1 million last year, and incurred expenses on labor, capital, and materials totaling $950,000 ($600,000 + $150,000 + $200,000), the firm's accounting profit would be the remaining amount, which is $50,000.