How do I determine the profit margin (return of sales)? Billy's Chrystal Stores, Inc. has assets of $5,000,000 and turns over its assets 1.2 times per year. Return on assets is 8 percent. What is the firm's profit margin?

To determine the profit margin (return on sales), you need to divide the net income by the net sales revenue. However, the given information doesn't include the net income or net sales revenue. Instead, it provides the assets turnover ratio and return on assets.

To calculate the profit margin, we can use the following formula:

Profit Margin = Net Income / Net Sales Revenue

Since the net income and net sales revenue are not provided, we'll need to use the provided information to calculate the missing values.

First, let's calculate the net sales revenue using the assets turnover ratio:

Assets Turnover Ratio = Net Sales Revenue / Average Total Assets

We are given that the assets turnover ratio is 1.2 and the average total assets are $5,000,000.

1.2 = Net Sales Revenue / $5,000,000

To find the net sales revenue, we multiply both sides of the equation by $5,000,000:

Net Sales Revenue = 1.2 x $5,000,000 = $6,000,000

Next, we can calculate the net income using the return on assets:

Return on Assets = Net Income / Average Total Assets

We are given that the return on assets is 8% and the average total assets are $5,000,000.

8% = Net Income / $5,000,000

To find the net income, we multiply both sides of the equation by $5,000,000 and convert the percentage to a decimal:

Net Income = 8% x $5,000,000 = (8/100) x $5,000,000 = $400,000

Now that we have the net income and net sales revenue, we can calculate the profit margin:

Profit Margin = Net Income / Net Sales Revenue
= $400,000 / $6,000,000
= 0.0667 or 6.67%

Therefore, Billy's Chrystal Stores, Inc. has a profit margin (return on sales) of 6.67%.