What is the net profit margin for TJX Inc. if the current ratio = 2; total asset turnover =1.5; total assets = $100,000; and EBIT = $30,000? Assume the marginal tax rate for TJX is 40% and that interest expenses are $10,000.
A) 20%
B) 8%
C) 12%
D) 6%

Question

Quizplus · Accepted Answer

Net profit margin is calculated as Net Income / Sales. First, we need to find Net Income, which is EBIT - Interest Expenses - Taxes. Given EBIT is $30,000 and Interest Expenses are $10,000, we have $20,000 before taxes. With a tax rate of 40%, taxes amount to $8,000 ($20,000 * 40%), leaving a Net Income of $12,000 ($20,000 - $8,000). To find Sales, we use the Total Asset Turnover formula, which is Sales / Total Assets. Given a Total Asset Turnover of 1.5 and Total Assets of $100,000, Sales = 1.5 * $100,000 = $150,000. Therefore, Net Profit Margin = Net Income / Sales = $12,000 / $150,000 = 8%.

What Is the Net Profit Margin for TJX Inc