Chapter Two Is a Paperback Book Exchange Store

question 98

Multiple Choice

Chapter Two is a paperback book exchange store.For each book trade,the buyer pays a $1 trade fee.Books that are sold and not traded cost half of their original purchase price.The store has total assets of $126,000,current assets of $40,200,and liabilities totalling $160,900.Its net sales equalled $35,000,and its net profit after taxes was $9,000.Calculate the store's net profit margin.

• A) 7.1 percent
• B) 21.7 percent
• C) 22.4 percent
• D) 25.7 percent
• E) 27.7 percent

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Definitions:

Operating Cash

Cash generated from a company's normal business operations.

Investing Activities

Financial transactions involving the acquisition or disposal of long-term assets or other investments not included in cash equivalents.

Financing Activities

Transactions involving raising funds for the company through borrowing or issuing equity.

Direct Method

A method of preparing the cash flow statement where actual cash receipts and payments are reported, instead of adjusting net income for changes in non-cash accounts.