If the total asset turnover of a firm is 1.5, total assets are $500,000, and net income is $50,000, what is the profit margin?

Question

Quizplus · Accepted Answer

We can use the formula Profit Margin = Net Income / Total Revenue.
Total Revenue can be calculated as Total Assets * Total Asset Turnover. Therefore,
Total Revenue = $500,000 * 1.5 = $750,000
Profit Margin = $50,000 / $750,000 = 0.0667 or 6.67%
Therefore, the answer is C) 6.7%.

If the Total Asset Turnover of a Firm Is 1