Question

Condensed financial data are presented below for the Phoenix Corporation: 20X2 20X1 Accounts receivable $ 267,500 $ 230,000 Inventory 312,500 257,500 Total current assets 670,000 565,000 Intangible assets 50,000 60,000 Total assets 825,000 695,000 Current liabilities 252,500 200,000 Long-term liabilities 77,500 75,000 Sales 1,640,000 Cost of goods sold 982,500 Interest expense 10,000 Income tax expense 77,500 Net income 127,500 Cash flow from operations 71,000 Cash flow from investing activities (6,000 ) Cash flow from financing activities (62,500 ) Tax rate 30 % The profit margin used to calculate return on assets for 20X2 is (rounded):

Answer 1

Answer:

7.77%

Explanation:

The profit margin is the quotient between net income and sales

Profit margin = Net income / Sales

Net income = $127,500

Sales = $1,640,000

Net profit margin = 7.77%

The above means that the firm achieves 7.77% net income from every dollar of sales.