Question

Sports unlimited reports net income of $240,000, sales revenue of $24 million, and average assets of $3 million. the profit margin is: multiple choice

O 10%.
O 8%.
O 1%.
O 12.5%.

Answer 1

Sports Unlimited rakes in $24 million, but their net income is a measly $240,000. That translates to a profit margin of just 1%. A penny on every dollar? So, The correct answer is O) 1%.

Here's how to calculate the profit margin:

Profit Margin = Net Income / Sales Revenue

Profit Margin = $240,000 / $24,000,000

Profit Margin = 0.01 (or 1%)

Therefore, Sports Unlimited's profit margin is approximately 1%.

The other options are incorrect:

10% and 12.5% are significantly higher than the actual margin.

8% is slightly higher than the calculated margin.

The correct answer is O) 1%.