Given the following information for Mouse Inc., calculate its profit margin for the year 20x1.

\begin{tabular}{|l|l|l|}
\hline
\[tex]$[/tex] in thousands & [tex]$20 \times 1$[/tex] & [tex]$20 \times 2$[/tex] \\
\hline
Net income & \[tex]$500 & \$[/tex]50 \\
\hline
Net sales & 3500 & 3650 \\
\hline
Accounts receivable & 2150 & 1500 \\
\hline
\end{tabular}

A. 14.29\%
B. 61.42\%
C. 57\%
D. 7\%



Answer :

To calculate the profit margin for Mouse Inc. for the year 20x1, we follow these steps:

1. Identify the net income for the year 20x1.
2. Identify the net sales for the year 20x1.
3. Use the profit margin formula:

[tex]\[ \text{Profit Margin} = \left( \frac{\text{Net Income}}{\text{Net Sales}} \right) \times 100 \][/tex]

Detailed Solution:

1. From the table, the net income for the year 20x1 is given as \[tex]$500 thousand. 2. Similarly, from the table, the net sales for the year 20x1 is given as \$[/tex]3500 thousand.
3. Now, substitute these values into the profit margin formula:

[tex]\[ \text{Profit Margin} = \left( \frac{500}{3500} \right) \times 100 \][/tex]

4. Simplify the fraction inside the formula first:

[tex]\[ \frac{500}{3500} = \frac{1}{7} \][/tex]

5. Then, multiply by 100 to express the margin as a percentage:

[tex]\[ \text{Profit Margin} = \left( \frac{1}{7} \right) \times 100 \approx 14.29 \% \][/tex]

Therefore, the profit margin for Mouse Inc. for the year 20x1 is approximately 14.29%.