Question

Problem 2-1

Given the following information: Use Figure 2.3.

Categories	Values
Sales	$	51,200,000
Cost of goods sold	$	32,000,000
Variable expenses	$	6,400,000
Fixed expenses	$	7,200,000
Inventory	$	9,200,000
Accounts receivable	$	5,200,000
Other current assets	$	4,200,000
Fixed assets	$	7,200,000

a. What is the net profit margin for this firm? (Round your answer to 2 decimal places.)

b. What is the asset turnover? (Round your answer to 2 decimal places.)

c. What is the return on assets? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What is the size of the total assets used by the firm?

Answer 1

Particulars	Amount
Sales	51,200,000
Less: Cost of goods sold	32,000,000
Gross Profit	19,200,000
Less: Variable expenses	6,400,000
Less : fixed expenses	7,200,000
Net Profit	5,600,000
Net profit Margin = Net profit / Sales
Net profit margin = 5600000/51200000
Net profit margin = 10.94%
Particulars	Amount
Inventory	9200000
Accounts Receivable	5200000
Other current assets	4200000
Fixed assets	7200000
Total Assets	25800000
Asset Turnover ratio = Sales/ Total assets
Asset turnover ratio = 51200000/25800000
Asset turnover ratio = 1.98 times
Return on assets = Net Income / Total Assets
Return on assets = 5600000/25800000
Return on assets =21.71%