Profit Margin: Profit margin reflects the portion of net income in the net sales. It is a profitability measure tool that is used to evaluate the net income a business earns on every dollar of net sales. Return on Total Assets: It evaluates the efficiency of company’s assets. It reports the profit earned as the percentage of total assets used in the business. A company’s rate of return on total assets reflects its ability to optimize the use of total assets. Return on Common shareholder’s equity: It measures the net income available to common shareholders of the company. A company’s rate of return on equity shows the amount earned for each dollar invested by the common shareholders. To calculate: The profit margin on sales, return on assets and return on shareholders’ equity for the year 2016.

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Chapter 5, Problem 5.32BE

To determine

Profit Margin:

Profit margin reflects the portion of net income in the net sales. It is a profitability measure tool that is used to evaluate the net income a business earns on every dollar of net sales.

Return on Total Assets:

It evaluates the efficiency of company’s assets. It reports the profit earned as the percentage of total assets used in the business. A company’s rate of return on total assets reflects its ability to optimize the use of total assets.

Return on Common shareholder’s equity:

It measures the net income available to common shareholders of the company. A company’s rate of return on equity shows the amount earned for each dollar invested by the common shareholders.

To calculate: The profit margin on sales, return on assets and return on shareholders’ equity for the year 2016.

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