### Profit Margin Calculation ExerciseA company reported net income of $4,805 for October. Its net sales for October were $15,500. Its profit margin is:**Multiple Choice:**- ⬜ 7%- ⬜ 31%- ⬜ 3%- ⬜ 323%- ⬜ 200%#### Explanation:In this exercise, we are looking to calculate the company's profit margin for October using the given financial information. Profit margin is calculated using the formula:\[ \text{Profit Margin} = \left( \frac{\text{Net Income}}{\text{Net Sales}} \right) \times 100 \]Given:- Net Income = $4,805- Net Sales = $15,500Substitute these values into the formula:\[ \text{Profit Margin} = \left( \frac{4,805}{15,500} \right) \times 100 \]Simplify the fraction:\[ \frac{4,805}{15,500} \approx 0.31065 \]Convert to a percentage:\[ 0.31065 \times 100 \approx 31.065\% \]Based on this calculation, the answer to the multiple choice question is:- ⬜ 7%- ✅ 31%- ⬜ 3%- ⬜ 323%- ⬜ 200%This shows that the company's profit margin for October is approximately 31%.

Profit margin refers to the measurement tool which measures the degree of profitability of a…

Answered: A company reported net income of $4,805…

A company reported net income of $4,805 for October. Its net sales for October were $15,500. Its profit margin is: Multiple Choice 7%. O ( 31%. 3%. 323%. 200%.

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

### Profit Margin Calculation Exercise

A company reported net income of $4,805 for October. Its net sales for October were $15,500. Its profit margin is:

**Multiple Choice:**

- ⬜ 7%
- ⬜ 31%
- ⬜ 3%
- ⬜ 323%
- ⬜ 200%

#### Explanation:

In this exercise, we are looking to calculate the company's profit margin for October using the given financial information. Profit margin is calculated using the formula:

\[ \text{Profit Margin} = \left( \frac{\text{Net Income}}{\text{Net Sales}} \right) \times 100 \]

Given:
- Net Income = $4,805
- Net Sales = $15,500

Substitute these values into the formula:

\[ \text{Profit Margin} = \left( \frac{4,805}{15,500} \right) \times 100 \]

Simplify the fraction:

\[ \frac{4,805}{15,500} \approx 0.31065 \]

Convert to a percentage:

\[ 0.31065 \times 100 \approx 31.065\% \]

Based on this calculation, the answer to the multiple choice question is:

- ⬜ 7%
- ✅ 31%
- ⬜ 3%
- ⬜ 323%
- ⬜ 200%

This shows that the company's profit margin for October is approximately 31%.

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