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Financial & Managerial Accounting
Found in: Page 143
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Damita Company reported net income of $48,025 and net sales of $425,000 for the current year. Calculate

the company’s profit margin and interpret the result. Assume that its competitors earn an average profit

margin of 15%.

Answer:

The net profit margin is 11.3%

See the step by step solution

Step by Step Solution

Step 1: Definition of net income

Net income is the income that remains after deducting all expenses from revenue.

Step 2:  Calculation of net profit margin

Hence, the net profit margin of Damita Company is 11.3%

The net profit margin of Damita company is less than its competitor’s margin.

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