Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Profit Margin

Financial Accounting

14. Financial Statement Analysis

Ratios: Profit Margin

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Multiple Choice

If Product A has sales revenue of \$50,000 and cost of goods sold of \$35,000, what is the profit margin of Product A?

25%

40%

15%

30%

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Verified step by step guidance

Step 1: Understand the formula for profit margin. The profit margin is calculated as: $ \text{Profit Margin} = \frac{\text{Net Income}}{\text{Sales Revenue}} \times 100 $.

Step 2: Calculate the Net Income. Net Income is the difference between Sales Revenue and Cost of Goods Sold (COGS). Use the formula: $ \text{Net Income} = \text{Sales Revenue} - \text{COGS} $.

Step 3: Substitute the given values into the Net Income formula. Sales Revenue is $ \$50,000 $ and COGS is $ \$35,000 $.

Step 4: Once you have the Net Income, substitute it into the Profit Margin formula along with the Sales Revenue value. Use $ \text{Profit Margin} = \frac{\text{Net Income}}{\text{Sales Revenue}} \times 100 $.

Step 5: Simplify the expression to calculate the Profit Margin percentage. Compare the result to the provided options to verify the correct answer.