Question

Use the following information:
Categories			Values
Sales		$	40,000,000
Cost of goods sold		$	25,000,000
Variable expenses		$	5,000,000
Fixed expenses		$	6,500,000
Inventory		$	8,500,000
Accounts Receivable		$	4,500,000
Other current assets		$	3,500,000
Fixed assets		$	6,500,000
Find the following
A: Net profit margin
B: What is the asset turnover
C: What is the return on assets
D: What is the size of the total assets used by the firm

Answer 1

Answer a.

Net Income = Sales - Cost of Goods Sold - Variable Expenses - Fixed Expenses
Net Income = $40,000,000 - $25,000,000 - $5,000,000 - $6,500,000
Net Income = $3,500,000

Net Profit Margin = Net Income / Sales
Net Profit Margin = $3,500,000 / $40,000,000
Net Profit Margin = 8.75%

Answer b.

Total Assets = Inventory + Accounts Receivable + Other Current Assets + Fixed Assets
Total Assets = $8,500,000 + $4,500,000 + $3,500,000 + $6,500,000
Total Assets = $23,000,000

Asset Turnover = Sales / Total Assets
Asset Turnover = $40,000,000 / $23,000,000
Asset Turnover = 1.74 times

Answer c.

Return on Assets = Net Income / Total Assets
Return on Assets = $3,500,000 / $23,000,000
Return on Assets = 15.22%

Answer d.

Total assets used by the firm is $23,000,000