Asked by Kaleb Shukeat on May 25, 2024
Verified
The Southern Division of Knucklehead Company has a return on investment of 15% and an investment turnover of 1.2. What is the profit margin?
A) 1.5%
B) 12.5%
C) 0.67%
D) 6.67%
Profit Margin
A financial ratio indicating the percentage of revenue that remains as profit after accounting for the cost of goods sold and other expenses; a measure of profitability.
Investment Turnover
A financial ratio that measures the efficiency of a company in generating sales from its investments in securities or fixed assets.
Return On Investment
A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several different investments.
- Work out and convey the significance of the profit margin for subdivisions or conglomerates.
Verified Answer
HK
Harmanpreet kaur SidhuMay 27, 2024
Final Answer :
B
Explanation :
The profit margin can be calculated using the formula: Profit Margin = Return on Investment (ROI) / Investment Turnover. Substituting the given values: Profit Margin = 15% / 1.2 = 12.5%.
Learning Objectives
- Work out and convey the significance of the profit margin for subdivisions or conglomerates.