A company reported net income for Year 1 of $98,000 and $106,000 for Year 2. It also reported net sales of $835,000 in Year 1 and $918,000 in Year 2. The company's average total assets in Year 1 were $1,850,000 and $1,720,000 in Year 2. Calculate the company's profit margin, total asset turnover and return on total assets for Year 1 and Year 2. Comment on the results.
What will be an ideal response?
| Year 1: | ? |
| Profit margin: $98,000/$835,000 = | 11.7% |
| Total asset turnover: $835,000/$1,850,000 = | 0.45 |
| Return on total assets: $98,000/$1,850,000 = | 5.3% |
| ? | ? |
| Year 2: | ? |
| Profit margin: $106,000/$918,000 = | 11.5% |
| Total asset turnover: $918,000/$1,720,000 = | 0.534 |
| Return on total assets: $106,000/$1,720,000 = | 6.2% |
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