What is the profit margin (return on sales) on this problem?

Question

Neon Light Company has $1,000,000 in assets and $600,000 of debt. It reports net income of $100,000.

If the firm has an asset turnover ratio of 3 times, what is the profit margin (return on sales)?

Answer 1

Total Asset Turnover = Net sales/ Total Assets =3

Net sales = 3 x 1,000,000 = 3,000,000

Profit margin = Net income/Sales = 100,000/3,000,000 = 3.33%

Answer 2

Profit Margin Return On Sales