Question

The balance sheet and income statement shown below are for Konki Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over Balance Sheet (Millions of 5) Assets Cash and securities Accounts receivable Inventories Total current assets Net plant and equipment Total assets Liabilities and Equity Accounts payable Accruals Notes payable Total current liabilities 2018 $3,000 15,000 18,000 $36,000 $24,000 $60,000 $18,630 8,370 6,000 $33,000 Long-term bonds Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity $5,000 $42,000 $5,040 12,960 $18,000 $60,000 Income Statement (Millions of s) Net sales Operating costs except depreciation Depreciation Earnings before interest and taxes (EBIT) Less interest 2018 $84,000 78,120 1,680 $4,200 900

Answer 1

Option (a) is correct

Formula for profit margin is:

Profit margin = Net income / Sales * 100

Given:

Net income = $1980, Sales = $84000

Net Profit margin = $1980 / $84000 * 100 = 2.36%