If a company has a net income of $250,000 and total revenue of $1,000,000, what
Practice Questions
Q1
If a company has a net income of $250,000 and total revenue of $1,000,000, what is the profit margin?
25%
20%
30%
15%
Questions & Step-by-Step Solutions
If a company has a net income of $250,000 and total revenue of $1,000,000, what is the profit margin?
Step 1: Identify the net income, which is $250,000.
Step 2: Identify the total revenue, which is $1,000,000.
Step 3: Use the profit margin formula: Profit Margin = (Net Income / Total Revenue) * 100.
Step 4: Substitute the values into the formula: Profit Margin = (250,000 / 1,000,000) * 100.
Step 5: Calculate the division: 250,000 divided by 1,000,000 equals 0.25.
Step 6: Multiply the result by 100: 0.25 * 100 equals 25.
Step 7: Conclude that the profit margin is 25%.
Profit Margin – Profit margin is a financial metric that shows the percentage of revenue that exceeds the costs of goods sold (COGS) and other expenses, indicating the profitability of a company.
