Question

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.

Sales = Assets x Total Asset turnover
Sales = $5,000 x 1.2 = $6,000,000
Net Income = Assets x return on assets
Net income =$5,000,000 x 8% = $400,000
Net Income/Sales = $4,00,000/$6,000,000 = 6.67%

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