Puffy's Pastries generates five cents of net income for every $1 in sales. Thus,Puffy's has a _______ of 5%.
A) return on assets
B) return on equity
C) profit margin
D) Du Pont measure
E) total asset turnover

Question

Quizplus · Accepted Answer

The given information of generating 5 cents of net income for every $1 in sales is used to calculate the profit margin, which is the percentage of each dollar of sales that results in net income. Thus, Puffy's has a profit margin of 5%. Choice A) return on assets requires information about the company's total assets and net income to calculate the percentage return. Choice B) return on equity requires information about the company's equity and net income. Choices D) Du Pont measure and E) total asset turnover require multiple financial ratios to be calculated using additional information about the company.

Puffy's Pastries Generates Five Cents of Net Income for Every