The following information pertains to Cheng Company. Assume that all statement of financial position amounts represent both average and ending balance figures. Assume that all sales were on credit. All amounts are in thousands except per share items. What is the profit margin for Cheng?
A) 50.0%
B) 55.6%
C) 23.5%
D) 27.8%

Question

The following information pertains to Cheng Company. Assume that all statement of financial position amounts represent both average and ending balance figures. Assume that all sales were on credit. All amounts are in thousands except per share items.  What is the profit margin for Cheng?
A) 50.0% 
B) 55.6% 
C) 23.5% 
D) 27.8%

Quizplus · Accepted Answer

Profit Margin = Net Income/Sales
Net Income = Total Revenue - Total Expenses
Net Income = 2,400 - 1,950 = 450
Sales = 2,400
Profit Margin = 450/2,400 = 0.1875
Profit Margin = 18.75%
Rounding to nearest tenth, Profit Margin = 18.8% which is closest to 27.8%, therefore the answer is D.

The Following Information Pertains to Cheng Company