The Anderson Company has sales of $4,500,000. It also has invested assets of $2,000,000 and operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.
What is Anderson Company's profit margin?
18%
44.4%
20%
80%
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Sra
To calculate the profit margin, we need to divide the net profit by the sales revenue and multiply by 100.
Net profit can be calculated by subtracting the operating expenses from the sales revenue.
Net Profit = Sales Revenue - Operating Expenses
Sales Revenue = $4,500,000
Operating Expenses = $3,600,000
Net Profit = $4,500,000 - $3,600,000
Net Profit = $900,000
Profit Margin = (Net Profit / Sales Revenue) * 100
Profit Margin = ($900,000 / $4,500,000) * 100
Profit Margin = 0.2 * 100
Profit Margin = 20%
Therefore, the Anderson Company's profit margin is 20%.