Smith Company Balance Sheet and selected Income Statement data

Assets:

Cash and marketable securities $300,000

Accounts receivable 2,215,000

Inventories 1,837,500

Prepaid expenses 24,000

Total current assets $3,286,500

Fixed assets 2,700,000

Less: accumulated depreciation 1,087,500

Net fixed assets $1,612,500

Total assets $4,899,000

Liabilities:

Accounts payable $240,000

Notes payable 825,000

Accrued taxes 42,500

Total current liabilities $1,107,000

Longminusterm

debt 975,000

Owner's equity 2,817,000

Total liabilities and owner's equity $4,899,000

Net sales (all credit) $6,375,000

Less: Cost of goods sold 4,312,500

Selling and administrative expense 1,387,500

Depreciation expense 135,000

Interest expense 127,000

Earnings before taxes $412,500

Income taxes 225,000

Net income $187,500

Common stock dividends $97,500

Change in retained earnings $90,000

Based on the information in Table 1, the net profit margin is

A.

2.94%.

B.

4.61%.

C.

1.97%.

D.

5.33%.