Calculate net income given the following information: fixed asset turnover = 4 times; profit margin = 20%; net fixed assets = $25,000.
A) $16,000
B) $18,000
C) $20,000
D) $22,000
E) $24,000

Question

Quizplus · Accepted Answer

Net income is calculated by first finding the sales revenue using the fixed asset turnover formula, which is Sales/Net Fixed Assets. Given a turnover of 4 times and net fixed assets of $25,000, sales are $100,000 (4 * $25,000). With a profit margin of 20%, net income is 20% of $100,000, which equals $20,000.

Calculate Net Income Given the Following Information: Fixed Asset Turnover