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Gamma Co., a manufacturer of medical products, had a 10% return on assets and an asset turnover of 4:1. What was Gamma's profit margin on sales?

A.40.0%
B.10.0%
C. 4.0%
D. 2.5%

User Sanrodari
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1 Answer

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Final answer:

To find Gamma's profit margin on sales, we can use the formula: Profit Margin = Return on Assets x Asset Turnover. Given that Gamma's return on assets is 10% and its asset turnover is 4:1, the profit margin is 2.5%.

Step-by-step explanation:

To find Gamma's profit margin on sales, we can use the formula:



Profit Margin = Return on Assets × Asset Turnover



Given that Gamma's return on assets is 10% and its asset turnover is 4:1, we can calculate the profit margin as:



Profit Margin = 10% × (1 / 4) = 2.5%



Therefore, the correct answer is Option D. 2.5%.

User Philipp Wendler
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