Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.

-The profit margin for National Textile is
A)60 percent.
B)25 percent.
C)20 percent.
D)12 percent.

Question

Use this balance sheet and income statement to answer the following question.Use ending balances whenever average balances are required for computing ratios.

-The profit margin for National Textile is
A)60 percent. 
B)25 percent. 
C)20 percent. 
D)12 percent.

Quizplus · Accepted Answer

The profit margin is calculated by dividing the net income by the total revenue. From the income statement, the net income is $3,000 and the total revenue is $15,000, which gives a profit margin of 20% ($3,000/$15,000). Therefore, the best choice is C, which is 20 percent.

Use This Balance Sheet and Income Statement to Answer the Following