Question

Exhibit 13-1
Xavier Company reported the following income statement and balance sheet amounts on December 31, 2017.

	2017	2016
Net sales revenue (all credit)	$1,800,000
Cost of goods sold	1,040,000
Gross margin	760,000
Selling and general expenses	420,000
Interest expense	60,000
Net income	$ 280,000
Current assets	$  100,000	$  90,000
Long-term assets	830,000	800,000
Total assets	$930,000	$890,000
Current liabilities	$  72,000	$  56,000
Long-term liabilities	204,000	390,000
Common stockholders’ equity	654,000	444,000
Total liabilities and stockholders' equity	$930,000	$890,000

Inventory and prepaid expenses account for $50,000 of the 2017 current assets.
Average inventory for 2017 is $36,000.
Average net accounts receivable for 2017 is $62,000.
Average one-day sales are $5,900.
There are 12,000 shares of common stock outstanding at the end of 2017.
The market price per share of common stock is $28 at the end of 2017.
The EPS for 2017 is equal to $1.50 per share.

Refer to Exhibit 13-1. What is the profit margin ratio for 2017 (rounded to the nearest tenth of a percent)?

Group of answer choices

10.6%

1.1%

15.6%

38.8%

None of the answer choices is correct.

Answer 1

Profit margin ratio = Net income/Sales = 280,000/1,800,000 = 15.6% Option C is the answer