Question

#19

Assume the Hiking Shoes division of the All About Shoes Corporation had the following results last year​ (in thousands).​ Management's target rate of return is

15​%

and the weighted average cost of capital is

25​%.

Its effective tax rate is

25​%.

Sales	$ $9,000,000
Operating income	3,150,000
Total assets	3,000,000
Current liabilities	850,000

What is the​ division's sales​ margin?

Answer 1

Division's Sales Margin = Operating Income / Sales

                                  = 3,150,000 / 9,000,000

                                  = 0.35 or 35%