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Net income is $248,000 and sales are $994,000. What is the profit margin (to one decimal)?
A58.4%
B24.9%
C33.9%
D12.5%
Answer & Solution
Correct answer: B. 24.9%
1. Profit margin = net income / sales.
2. = $248,000 / $994,000.
3. = 0.249 = 24.9%.
4. Trap: 58.4% (option B) is the gross profit percentage, which uses gross profit, not net income.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.3.4 "Profit Margin", p.309_
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