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Found in: Page 79

### Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

# Baker Oats had an asset turnover of 1.6 times per year.a. If the return on total assets (investment) was 11.2 percent, what was Baker’s profit margin?

The profit margin of the company is 7%.

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## Profit margin

The profit margin of the company is calculated as a percentage of income divided by revenue. Net profit margins are most used by creditors, investors, and the businesses themselves to evaluate the financial health of the company.

Although there are many types of profit margins, the most important and commonly used is the net profit margin - calculated after deducting all the company's expenses, including taxes and interests.

Another way to compute the net profit margin is to use the DuPont model, in which: ROA (Return on assets) = Net profit margin x Asset Turnover.