Question

the company has sales of $10,000,000, total assets of $2,400,000, stockholders' equity of $2,000,000, and net income of $500,000. calculate the company's profit margin. multiple choice question. 2% 20% 25% 5%

Answer 1

The company's profit margin can be calculated by dividing the net income by the sales and multiplying the result by 100 to express it as a percentage.

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

Profit Margin = (Net Income / Sales) * 100

Given the information in the question:
Net Income = $500,000
Sales = $10,000,000

Let's substitute these values into the formula and calculate the profit margin:

Profit Margin = ($500,000 / $10,000,000) * 100

First, divide $500,000 by $10,000,000:
Profit Margin = 0.05 * 100

Multiply the result by 100 to express it as a percentage:
Profit Margin = 5%

So, the company's profit margin is 5%.