Question

Denver, Incorporated, has sales of $19 million, total assets of $14 million, and total debt of $4.8 million. What is the profit margin?

1) 6.32%
2) 7.37%
3) 8.42%
4) 9.47%

Answer 1

To calculate the profit margin, subtract the total debt from the sales to find the net profit and then divide the net profit by sales and multiply by 100. In this case, the correct profit margin for Denver, Incorporated is 74.7%.

Step-by-step explanation:

To calculate the profit margin, we can use the formula:

Profit Margin = (Net Profit / Sales) × 100

Given that Denver, Incorporated has sales of $19 million and total debt of $4.8 million, we can calculate the net profit by subtracting the total debt from the sales:

Net Profit = Sales - Total Debt = $19 million - $4.8 million = $14.2 million

Plugging in the values, we get:

Profit Margin = ($14.2 million / $19 million) × 100 = 74.7%

Therefore, none of the provided options of 6.32%, 7.37%, 8.42%, and 9.47% are correct. The correct profit margin for Denver, Incorporated is 74.7%.