Answer 1:

Division A (Information Given)

Given)
Profit: $100,000
Sales: $2,000,000
Profit Margin: Net Income
Net Income
Sales
Sales
($100,000/$2,000,000) * 100
100
Profit Margin for Division A: 5%
Division B: 8.33%

Division B (Information
Profit: $25,000
Sales: $300,000
Profit Margin:

($100,000/$2,000,000) *
Profit Margin for

Profit Margin (return on sales) for Division B is higher than Profit Margin for Division A, hence
division B is superior.

Answer 2:
(Information Given)
Cost of Assets: $500,000
Sales: $1,200,000
Profit Margin: 6%
Return on assets(investment): Net Income
Total Assets
Profit Margin: Net Income
Sales
Net income: Profit Margin * sales
(6/100) * $1,200,000
: $72,000
Return on assets(investment): ($72,000/$500,000) *100
:14.4%

Net Income for the year: $72,000

Return on assets(investment) :14.4%

Answer 3:
(Information Given)
Annual Sales: $960,000
Asset Turn Over: 2.4 times per year
Profit Margin: 7%
Profit Margin: Net Income
Sales
Net income: Profit Margin x sales
(7 * $960,000)/100
$67,200
Asset Turn over:

Sales___
Total Assets

Total Assets: Sales/Asset Turn over

$960,000/2.4
$400,000
Return on assets(investment): Net Income
Total Assets
: ($67,200/$400,000) * 100
: 16.8%
Net Income for the year: $67,200
Return on assets(investment) :16.8%

Answer 4:
(Information Given)
Assets: $5,000,000
Asset Turn Over: 1.2 times per year
Return on Assets: 8%
Asset Turn over:

Sales___
Total Assets

Sales: $5,000,000 * 1.2

: $6,000,000
Return on assets(investment): Net Income
Total Assets
Net Income: (8*$5,000,000)/100
: $400,000

Profit Margin: Net Income

Sales
:($400,000/$6,000,000)*100
:6.67%
Profit Margin (return on sales) : 6.67%