Question

Elizabeth Tailors Inc. has assets of $8,160,000 and turns over its assets 2.2 times per year. Return on assets is 18.5 percent.  
    
What is the firm’s profit margin (returns on sales)?

Answer 1

Step-1:Calculation of total sales
	Total Sales		=	Total Assets x Assets Turnover
			=	$       81,60,000	x	2.2
			=	$    1,79,52,000
Step-2:Calculation of profit
	Profit		=	Total Assets x return on assets
			=	$       81,60,000	x	18.50%
			=	$       15,09,600
Step-3:Calculation of profit margin
	Profit Margin		=	Profit / Sales
			=	$       15,09,600	/	$ 1,79,52,000
			=	8.41%
	Thus,
	Firm’s profit margin (returns on sales)				8.41%