Watson Motors has a Total Asset Turnover of 2 They reported

Watson Motors has a Total Asset Turnover of 2. They reported Total Assets of 5 million and 2 million in net income, what was the firms profit margin?

Solution

Asset turnover = Sales/Asset
2 = Sales/5000,000
Sales = 2*5000,000 = 10,000,000$
Profit margin = Net income/ sales
=2,000,000/10,000,000
=20%