Question

Following are data for BioBeans and GreenKale, which sell organic produce and are of similar size. Average total assets Net sales Net income BioBeans Greenkale $227,500 $174,000 115,000 69,600 11,375 2,800 Required: 1a. Compute the profit margin for both companies. 1b. Compute the return on total assets for both companies. 2. Based on analysis of these two measures, which company is the preferred investment? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Required 2 Compute the return on total assets for both companies. Return on total assets Choose Numerator: 1 Choose Denominator: = Return on total assets Return on total assets BioBeans GreenKale < Req 1A Required 2 >

Answer 1

1a)		Profit margin
		Net Income	/	Sales	=	Profit margin
	Bio Beans	$                11,375	/	$        1,15,000	=	9.89%
	GrrenKale	$                  2,800	/	$            69,600	=	4.02%
1b)		Net Income	/	Average Assets	=	Return On Total Assets
	Bio Beans	$                11,375	/	$        2,27,500	=	5.00%
	GrrenKale	$                  2,800	/	$        1,74,000	=	1.61%
2)	Since profit margin and return on assets of Bio Beans are high.
	Bio Beans is the preferred investment.
	Please upvote.