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Foundations Of Financial Management
Found in: Page 24
Foundations Of Financial Management

Foundations Of Financial Management

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

Short Answer

Elizabeth Tailors Inc. has assets of $8,940,000 and turns over its assets 1.9 times per year. Return on assets is 13.5 percent. What is the firm’s profit margin (returns on sales)?

The profit margin of the company is 7.11%.

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Step by Step Solution

Total Sales of the company

Total sales = Assests turn over ratio X Average total assets

= 1.90X $ 8940000

= $ 16986000

Net income

Net income = Return on assests X Total assests

=13.5% X $ 8940000

= $ 1206900

Firm’s profit margin

Profit margin = Net income / Total sales

=$1206900/ $ 16986000

= 7.11 %

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