8The records of Milwakee sprinkler systems report net sales of 520,000 net income of 130,000 and average total assets of 360,000. Using DuPont analysis. Calculate the two ratios used for return on assets. SEE BELOW ### Financial Ratios AnalysisIn this section, we explore different scenarios of net profit margin ratios and total asset turnover rates. These metrics are crucial for evaluating a company's profitability and efficiency in using its assets.1. **Scenario A:** - **Net Profit Margin Ratio:** 25% - **Total Asset Turnover:** 1.442. **Scenario B:** - **Net Profit Margin Ratio:** 2.77% - **Total Asset Turnover:** 25%3. **Scenario C:** - **Net Profit Margin Ratio:** 36% - **Total Asset Turnover:** 44. **Scenario D:** - **Net Profit Margin Ratio:** 2.5% - **Total Asset Turnover:** 36%#### Explanation:- **Net Profit Margin Ratio** indicates how much profit a company makes for every dollar of sales.- **Total Asset Turnover** measures the efficiency of a company's use of its assets in generating sales revenue.These scenarios help in understanding different financial positions and strategic implications for business decision-making.

Answered: 8 The records of Milwakee sprinkler…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

8 The records of Milwakee sprinkler systems report net sales of 520,000 net income of 130,000 and average total assets of 360,000. Using DuPont analysis. Calculate the two ratios used for return on assets. SEE BELOW

### Financial Ratios Analysis

In this section, we explore different scenarios of net profit margin ratios and total asset turnover rates. These metrics are crucial for evaluating a company's profitability and efficiency in using its assets.

1. **Scenario A:**
- **Net Profit Margin Ratio:** 25%
- **Total Asset Turnover:** 1.44

2. **Scenario B:**
- **Net Profit Margin Ratio:** 2.77%
- **Total Asset Turnover:** 25%

3. **Scenario C:**
- **Net Profit Margin Ratio:** 36%
- **Total Asset Turnover:** 4

4. **Scenario D:**
- **Net Profit Margin Ratio:** 2.5%
- **Total Asset Turnover:** 36%

#### Explanation:
- **Net Profit Margin Ratio** indicates how much profit a company makes for every dollar of sales.
- **Total Asset Turnover** measures the efficiency of a company's use of its assets in generating sales revenue.

These scenarios help in understanding different financial positions and strategic implications for business decision-making.

Expert Solution

Explanation -

Ratio Analysis -

The ratio is the technique used by the prospective investor or an individual or strategist to read the company information in more detailed end accurate ways.

Ratio immediately recognizes the Liquidity, Profitability, and Solvency of the company.

By using ratio analysis comparison between two companies can also be done very easily and accurately.