Question

Refer to the following selected financial information from Shakley's Incorporated. Compute the company's profit margin for Year 2. Year 2 Year 1 Net sales $ 484,000 $ 427,350 Cost of goods sold 277,400 251,220 Interest expense 10,800 11,800 Net income before tax 68,350 53,780 Net income after tax 47,150 41,000 Total assets 319,300 294,600 Total liabilities 175,900 168,400 Total equity 143,400 126,200

Answer 1

Answer:

Profit margin = 9.74%

Explanation:

We know,

Profit Margin = (Net income after tax/Net sales) x 100

Profit margin is a profitability ratio that measures the company's overall performance. It also show how company performs financially.

Given,

Year 2,

Net Sales = $484,000

Net income after tax = $47,150

Therefore,

Profit Margin = $\frac{47,150}{484,000}$

Profit Margin = 9.74%

Hence, company is performing financially well.