Exhibit 19-5 Ridgeline Corporation has the following operating data for the year:

- Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the profit margin assuming the minimum rate of return on assets is 10%?

Question

Exhibit 19-5 Ridgeline Corporation has the following operating data for the year:

- Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the profit margin assuming the minimum rate of return on assets is 10%?

Quizplus · Accepted Answer

Profit margin = Net income / Total revenue

Minimum rate of return on assets = Net income / Total assets

We can rearrange the formula for the minimum rate of return on assets to solve for net income:

Net income = Minimum rate of return on assets x Total assets

Net income = 0.1 x $960,000 = $96,000

Using this net income, we can calculate the profit margin:

Profit margin = $96,000 / $375,000 = 0.256 or 25.6%

Exhibit 19-5 Ridgeline Corporation Has the Following Operating Data for the Year