Question

the southern division of knucklehead company has a return on investment of 15% and an investment turnover of 1.2 what is the profit margin

Answer 1

The profit margin of the Southern division of Knucklehead Company is 12.5%.

What is meant by profit margin?

Profit margin evaluates how much of each dollar in sales or services your company retains from its earnings and is stated as a percentage. When the net income of the business is divided by the net sales or revenue, the result is the profit margin. Profit margin is calculated as profit multiplied by revenue.

There is a net profit margin as well as a larger gross profit margin (smaller).  A bigger profit margin is always preferred because it indicates that the business makes more money from its sales. Profit margins indicated in percentage, however, might differ by industry. Retail businesses may have lower profit margins than growth companies, but they make up for this with bigger sales volumes.

A division's return on investment (ROI) = profit margin x investment turnover.

Given:

0.15 = profit margin x 1.20.

Profit margin = 0.15 / 1.2 = 0.125

So, 0.125 x 100 = 12.5%

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