Question

Last year Electric Autos had sales of $100 million and assets at the start of the year of $150 million. If its return on start-of-year assets was 15%, what was its operating profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places)

Answer 1

22.50%

Step-by-step explanation:

The return on assets (ROA) ratio is a financial measure of how much income is earned per $1 invested by the company on assets. It is calculated by dividing net income by average total assets. Operating profit margin is the ratio of operating profit or net income to sales.

Given that Electric Autos had sales of $100 million and assets at the start of the year of $150 million. If its return on start-of-year assets was 15%,

15% = Net income/$150 million

Net income = $22.50 million

Operating profit margin

= $22.50 million/$100 million

= 0.225

= 22.50%

Answer 2

22.5%

Step-by-step explanation:

If Electric Autos had a 15% return on start-of-year assets, and its assets at the start of the year were $150 million, the company's total profit is given by:

`P = 0.15*\$150\\P=\$22.5\ million`

If sales amounted to $100 million, the profit margin (M) is determined as:

`M = (\$22.5)/(\$100)\\ M=22.5\%`

Electric Autos had a profit margin of 22.5%