Chapter 13, Problem 10E

Summary Introduction

Concept Introduction:

Profit Margin Ratio:

Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. The formulas to calculate the Profit margin is as follows:

  $\text{Profit Margin = }\frac{\text{Net Income}}{\text{Sales}}$

Return on assets/ investment is a profitability ratio that represents the percentage return on the investment made. It is calculated by dividing the Net Income by the Average total assets. The formulas to calculate the ROI are as follows:

$\text{ROI= Operating income }÷\text{Average total assets}$

To calculate: the profit margin ratio, total asset turnover, and return on total asset ratio for the year 2018 and 2017 and comment on the results.