$2$ Profitability Ratios

Drone Delivery Canada is considering expanding into a new product line. The expansion will need a new asset support of $$650,000.$

It is estimated that they can generate $$2\mathrm{.}25$ million in annual sales, with a $5\%$ profit margin.

What would net income and return on assets $($investment$)$ be for the year?

Solution:

Profit $=$

Net Income $=$

ROA$=$

$3$ Profitability & Asset Utilization Ratios

Isaac instruments has assets of $$5,280,000$ and turns over its assets $2\mathrm{.}6$ times per year. ROA is $6\%.$

What is their profit margin?

Solution:

Asset $\frac{}{O}=$ Sales

Assets

Sales

Sales

ROA$=\frac{NI}{\text{T}\text{o}\text{t}\text{a}\text{l}\text{A}\text{s}\text{s}\text{e}\text{t}\text{s}}$

$NI=$ROA,$xNI=x$

NI

Total Assets

Pront Margin

Prothergin