The Clydesdale Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.
What is Clydesdale Company's profit margin?
A.20%
B.80%
C.44.4%
D.18%
20
To calculate the profit margin, we need to divide the company's net income by its sales revenue and express it as a percentage.
To find the net income, first, subtract the operating expenses from the sales revenue:
Net Income = Sales Revenue - Operating Expenses
Net Income = $4,500,000 - $3,600,000
Net Income = $900,000
Now, we can calculate the profit margin:
Profit Margin = (Net Income / Sales Revenue) * 100%
Profit Margin = ($900,000 / $4,500,000) * 100%
Profit Margin ≈ 0.2 * 100%
Profit Margin ≈ 20%
Therefore, the Clydesdale Company's profit margin is 20%.
The correct answer is A. 20%.
To calculate Clydesdale Company's profit margin, we need to take the net income and divide it by the sales revenue. Let's calculate the net income first.
Net Income = Sales Revenue - Operating Expenses
Net Income = $4,500,000 - $3,600,000
Net Income = $900,000
Now, let's calculate the profit margin:
Profit Margin = (Net Income / Sales Revenue) x 100
Profit Margin = ($900,000 / $4,500,000) x 100
Profit Margin = 0.2 x 100
Profit Margin = 20%
Therefore, the answer is A. 20%. The Clydesdale Company's profit margin is 20%.