PXG Co. has total assets of $9,500,000 and a total asset turnover of 2.45 times
PXG Co. has total assets of $9,500,000 and a total asset turnover of 2.45 times. Assume the return on assets is 11 percent.
What is its profit margin?
Homework Answers
Profit Margin is calculated by using the below mentioned formula:
= Net Profit / Sales
Total Assets Turnover ratio is calculated by using the below formula:
Total Assets Turnover Ratio = Net Sales / Total Assets
Total Assets Turnover Ratio = 2.45 times
Total Assets = $ 9,500,000
By feeding these values in the above mentioned formula we shall get net sales as:
Net Sales = 2.45 x $ 9,500,000
= $ 23,275,000
Return on Assets = Net Profit / Total Assets
Return on Assets = 11% or 0.11
Total Assets = $ 9,500,000
By feeding these values in the above mentioned formula we shall get net profit as:
Net Profit = 0.11 x $ 9,500,000
Net Profit = $ 1,045,000
Profit Margin = Net Profit / Sales
Net Profit = $ 1,045,000
Sales = $ 23,275,000
By feeding these values in the above mentioned formula we shall get profit margin as:
Profit Margin = $ 1,045,000 / $ 23,275,000
= 4.49% Approximately
Feel free to ask in case of any query relating to this question
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