The Beverage Division of Natural Foods Corporation had sales of $4,200,000 and operating income of $840,000 last year.The total assets of the Beverage Division were $1,680,000,while current liabilities were $360,000.Natural Foods Corporation's target rate of return is 9%,while its weighted average cost of capital is 7%.The effective tax rate for the company is 40%.
-What is the Beverage Division's sales margin?

Question

The Beverage Division of Natural Foods Corporation had sales of $4,200,000 and operating income of $840,000 last year.The total assets of the Beverage Division were $1,680,000,while current liabilities were $360,000.Natural Foods Corporation's target rate of return is 9%,while its weighted average cost of capital is 7%.The effective tax rate for the company is 40%. 
-What is the Beverage Division's sales margin?

Quizplus · Accepted Answer

The sales margin is calculated as operating income divided by sales. Here, it is $840,000 / $4,200,000 = 0.20 or 20.00%.

The Beverage Division of Natural Foods Corporation Had Sales of $4,200,000