A Company Reported Net Income for 2009 of $98,000 and $106,000

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\begin{array}{|ll|}\hline ext { 2009: } & \\hline ext { Profit margin: } \$ 98,000 / \$ 735,000= & \underline{13.3 \%} \\hline ext { Total asset turnover: } \$ 735,000 / \$ 1,850,000= & \underline{0.397} \\hline ext { Return on total assets: } \$ 98,000 / \$ 1,850,000= & \underline{5.3 \%} \\hline\\hline 2010: & \\hline ext { Profit margin: } \$ 106,000 / \$ 798,000= & 13.3 \% \\hline ext { Total asset turnover: } \$ 798,000 / \$ 1,720,000= & \underline{\underline{0.464}} \\hline ext { Return on total assets: } \$ 106,000 / \$ 1,720,000= & \underline{\underline{6.2 \%}} \\hline \end{array}

Comment: This company did not increase its profit margin from 2009 to 2010, however, it did increase its total asset turnover, mainly because total assets declined with no ill effects on sales. The effect is an overall increase in return on total assets.

A Company Reported Net Income for 2009 of $98,000 and $106,000

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