Final answer:
Harvey Market's profit margin is 5 percent, calculated from a 10 percent return on assets and a 2 times asset turnover. In the following year, despite a decrease in asset turnover to 1.9 times, the return on assets slightly increased from 10 percent to 10.07 percent due to a profit margin of 5.3 percent.
Step-by-step explanation:
The question pertains to profitability ratios, specifically the relationship between asset turnover, profit margin, and return on total assets. For part (a), we can calculate the profit margin using the given return on total assets (10 percent) and asset turnover (2 times per year). The profit margin is calculated by dividing the return on total assets by the asset turnover ratio. Thus, Harvey's profit margin is 10 percent divided by 2, which equals 5 percent.
For part (b), we compare the previous year's return on total assets to the following year when the asset turnover has changed to 1.9 times and the profit margin is 5.3 percent. The return on total assets is found by multiplying the profit margin by the asset turnover. Hence, the new return on total assets is 5.3 percent multiplied by 1.9, resulting in 10.07 percent. This means that Harvey's return on total assets has slightly increased from the previous year's 10 percent.