Concept #1: Ratios: Profit Margin

Practice: If XYZ Company has net sales of $500,000 and net income of $25,000, the profit margin is:

Practice: A company has income before taxes of $100,000. Net sales are $400,000 and gross profit is $300,000. What is the profit margin, assuming the company has a 40% tax rate?

Consider the following:
What is the net profit margin?
A) 24.31%
B) 24.24%
C) 18.34%
D) 19.05%

Consider the following financial data for Larry’s Pool Supply:
Calculate Larry’s net profit margin.
a. 4.16%
b. 8.23%
c. 5.96%
d. 11.24%
e. 17.82%

Owl Fitness needs to recall what its net sales were based on a profit margin of 12%, net income of $240,000 and average total assets of $1,000,000. Can you help?

L Company reported the following results for the year:
Sales $ 2,000,000
Gross Profit 900,000
Net Income 360,000
Cash from Operating Activities 720,000
L Company’s profit margin was:
a) 45%
b) 40%
c) 18%
d) 36%

Assume you are given the following relationships for the Warner Corporation:
Calculate Warner’s profit margin.
a. 15.49%
b. 2.58%
c. 4.29%
d. 1.66%
e. 9.31%