A company reports a profit margin of 20%. If the total revenue is $500,000, what
Practice Questions
Q1
A company reports a profit margin of 20%. If the total revenue is $500,000, what is the profit amount? (2023)
$80,000
$100,000
$120,000
$150,000
Questions & Step-by-Step Solutions
A company reports a profit margin of 20%. If the total revenue is $500,000, what is the profit amount? (2023)
Step 1: Understand that the profit margin is given as 20%. This means that for every dollar of revenue, the company keeps 20 cents as profit.
Step 2: Identify the total revenue, which is $500,000.
Step 3: To find the profit amount, calculate 20% of the total revenue. This can be done by converting 20% to a decimal, which is 0.2.
Step 4: Multiply the total revenue by the decimal form of the profit margin: 0.2 * 500,000.
Step 5: Perform the multiplication: 0.2 * 500,000 = 100,000.
Step 6: Conclude that the profit amount is $100,000.
Profit Margin – The profit margin is a financial metric that shows the percentage of revenue that exceeds the costs of goods sold (COGS). It is calculated by dividing profit by total revenue.
Calculating Profit – To find the profit amount, multiply the profit margin (as a decimal) by the total revenue.
