PXG Co. has total assets of $10,100,000 and a total asset turnover of 2.51 times. Assume the return on assets is 9 percent. What is its profit margin? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

Question

Business

Patrick

4 August, 12:21

PXG Co. has total assets of $10,100,000 and a total asset turnover of 2.51 times. Assume the return on assets is 9 percent. What is its profit margin? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Answers (1)

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Leila Snow · Answer 1

profit margin ≈ 3.59 %

Explanation:

Total asset = $10, 100,000

Total asset turnover = 2.51 times

Return asset = 9 %

profit margin = ?

Total asset turnover = Net sales / Total assets

Net sales = Total assets * Total asset turnover

Net sales = 10, 100,000 * 2.51

Net sales = $25351000

The net income can be calculated as

Return on asset = Net income / total asset

Net income = return on asset * total asset

Net income = 0.09 * 10,100,000

Net income = $909000

Let's find the profit margin

Profit margin = Net income / Net sales

Profit margin = 909000/25351000

Profit margin = 0.0358565737

Profit margin = 0.0359 0r 3.58565737052 %

profit margin ≈ 3.59 %