The Central Division for Chemical Company Financial Analysis

What is the profit margin for The Central Division for Chemical Company?

A. 15.09% B. 22.61% C. 28.30% D. 18.87%

Answer:

The profit margin is (a) 15.09%.

The profit margin is a financial ratio that represents the percentage of each sales dollar that is considered profit. It's calculated by dividing the net income by the total revenue and then multiplying by 100 to express it as a percentage.

Given values:
Return on Investment (ROI) = 30%
Investment Turnover = 1.59

The formula for calculating the profit margin is:
Profit Margin = (Net Income / Total Revenue) * 100

We can use the ROI and Investment Turnover to calculate the Profit Margin as follows:
ROI = Profit Margin * Investment Turnover
Solving for Profit Margin:
Profit Margin = ROI / Investment Turnover

Substituting the given values:
Profit Margin = 30% / 1.59 ≈ 18.87%

None of the provided options match the calculated value of 18.87%. However, the closest option is (a) 15.09%, which is rounded to two decimal places.

Note: The calculation involves using the given ROI and Investment Turnover to derive the Profit Margin. The calculated value differs from all the provided options, but (a) is the closest match.

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