Question

AD Corporation has net income of $425,000 and total sales of $2.5 million. The firm's profit margin is _____ % .

A) 17%
B) 25%
C) 17.5%
D) 10.75%

Answer 1

The profit margin of AD Corporation is calculated by dividing the net income by the total sales and multiplying by 100%. With a net income of $425,000 and total sales of $2.5 million, the profit margin is 17%.

Step-by-step explanation:

The question asks about calculating the profit margin of AD Corporation. The profit margin is a financial ratio that illustrates the percentage of net income to total sales.

To determine the profit margin percentage, we use the formula: Profit Margin = (Net Income / Total Sales) × 100%.

For AD Corporation, with a net income of $425,000 and total sales of $2.5 million, the profit margin calculation would be: ($425,000 / $2,500,000) × 100% = 17%. This means that the correct answer is option A) 17%.