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Concept Introduction:
Profit Margin:
The proportion of net profit or net income of the company by its revenue refers to profit margin. It is represented as a percentage and indicates the efficiency of the company in using its income. Profit margin facilitate comparison with the competitor and helps to concentrate in the improvement of business.
Requirement 1:
To Calculate:
The Profit margin for the company Edison Co. to measure the profitability of a business activity.
Concept Introduction:
Requirement 2:
Return on total assets:
Return on assets is the ratio of profit of the business in relation to the total assets of the company. In other words, return on assets also represents the efficient usage of resources or assets by the management in generating revenues.
To Calculate:
The return on total assets of Edison Co. for the year to measure its efficiency in using its assets to generate income before paying off debts.
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Chapter 17 Solutions
Fundamental Accounting Principles
- Financial Accounting problemarrow_forwardExplanation? General Accountingarrow_forwardOn January 1, 2023, Barber Corporation paid $1,160,000 to acquire Thompson Company. Thompson maintained separate incorporation. Barber used the equity method to account for the investment. The following information is available for Thompson’s assets, liabilities, and stockholders' equity accounts on January 1, 2023: Book Value Fair Value Current assets $ 130,000 $ 130,000 Land 75,000 193,000 Building (twenty-year life) 250,000 276,000 Equipment (ten-year life) 540,000 518,000 Current liabilities 26,000 26,000 Long-term liabilities 124,000 124,000 Common stock 233,000 Additional paid-in capital 389,000 Retained earnings 223,000 Thompson earned net income for 2023 of $134,000 and paid dividends of $51,000 during the year. If Barber Corporation had net income of $468,000 in 2023, exclusive of the investment, what is the amount of consolidated net income?arrow_forward
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