The Poole Company reported the following income for Year 2: $\begin{array}{lr}
\text { Sales } & \$ 30,000 \
\text { Cost of goods sold } & \underline{8,000} \
\text { Gross margin } &\$ 22,000 \
\text { Selling and administrative expense } & \underline{10,000} \
\text { Operating income } & \$ 12,000\
\text { Interest expense } & \underline{ 4,000 }\
\text { Income before taxes } & \$ 8,000 \
\text { income tax expense } & \underline{2,500} \
\text { Net income } & \underline{ \$ 5,500}
\end{array}$
What is the company's net margin? (Rounded to the nearest whole percent.)
A) 73%
B) 40%
C) 18%
D) 27%

Question

The Poole Company reported the following income for Year 2: $\begin{array}{lr}
\text { Sales } & \$ 30,000 \
\text { Cost of goods sold } &  \underline{8,000} \
\text { Gross margin } &\$ 22,000 \
\text { Selling and administrative expense } &  \underline{10,000} \
\text { Operating income } & \$ 12,000\
\text { Interest expense } & \underline{ 4,000 }\
\text { Income before taxes } & \$ 8,000 \
\text { income tax expense } &  \underline{2,500} \
\text { Net income } & \underline{ \$ 5,500}
\end{array}$
 What is the company's net margin? (Rounded to the nearest whole percent.)
A) 73%
B) 40%
C) 18%
D) 27%

Quizplus · Accepted Answer

Net margin is calculated as Net Income divided by Sales, then multiplied by 100 to convert to a percentage. For the Poole Company, this is $\frac{5500}{30000} \times 100 = 18.33%$, which rounds to 18%.

The Poole Company Reported the Following Income for Year 2