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: Profit Margin = Net Income 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: ROI= Operating income ÷ Average total assets To Calculate: the profit margin and return on total assets of the company for both the companies.

Question

Want to see the full answer?

Answer 1

Question

Chapter 13, Problem 16E

1.

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:

Profit Margin = Net IncomeSales

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:

ROI= Operating income ÷Average total assets

To Calculate: the profit margin and return on total assets of the company for both the companies.

2.

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:

Profit Margin = Net IncomeSales

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:

ROI= Operating income ÷Average total assets

To identify: the company preferable for the investment.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Cullumber Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2025, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $16,800, direct labor $10,080, and manufacturing overhead $13,440. As of January 1, Job 49 had been completed at a cost of $75,600 and was part of finished goods inventory. There was a $12,600 balance in the Raw Materials Inventory account on January 1. During the month of January, Cullumber Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $102,480 and $132,720, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $75,600 on account. 2. Incurred factory labor costs of $58,800. 3. Incurred manufacturing overhead costs as follows: depreciation expense on equipment $10,080; and various other…

General Accounting question