Question

A firm had sales of $52 million. The firm’s retained earnings changed by $-1 million. What was its net profit margin if the dividends paid were $5 million? Round to the nearest 0.1%, drop the % symbol.

Answer 1

Closing Balance of Retained Earnings = Opening Balance of Retained Earnings + Net Profit of Current Year - Dividend Paid

=>

Closing Balance of Retained Earnings - Opening Balance of Retained Earnings = Net Profit of Current Year - Dividend Paid

=>

-1,000,000 = Net Profit of Current Year - 5,000,000

Net Profit of Current Year = 5,000,000 - 1,000,000

Net Profit of Current Year = 4,000,000

Net Profit Margin = 7.6923% or 7.69

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