Question

Cabell Products is a division of a major corporation. Last year the division had total sales of $25,720,000, net operating income of $2,124320, and average operating assets of $6,400,000. The company's minimum required rate of return is 12%. The division's turnover is closest to: Multiple Choice 12.11
4.02
0.33
2.77

Answer 1

Profit Margin = Net operating income / Total sales

Margin = $2,124320/ $25,720,000 = 8.25%

Thus, the division's turnover is closest to 8.25%.

What is Profit Margin?

One of the frequently employed profitability statistics to determine how profitable a firm or a particular business activity is profit margin. It shows what portion of sales resulted in earnings. Simply put, the percentage value shows how much profit the company made for each dollar of sales—in cents. For instance, if a company declares a 35% profit margin for the most recent quarter, it indicates that it earned $0.35 in net income for every dollar of sales.

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