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# Profit margin

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The 2008 income statement of Holly Enterprise shows operating revenues of \$134,800, selling expenses \$38,310, general and adminstrative expenses \$36,990, interest expense \$580, and income tax expense of \$13,920. Holly's stockholders' equity was \$280,000 at the beginning of the year and \$320,000 at the end of the year. The company has 20,000 shares of stock outstanding at December 31, 2008.

Required

Compute Holly's profit margin. What other information would you need in order to comment on whether the ratio is favorable?

#### Solution Preview

Profit Margin = Net Income/Sales
Net Income = Operating Revenue - All expenses
Net Income = 134,800-38,310-36,990-580-13,920 = ...

#### Solution Summary

The solution explains how to calculate the profit margin for Holly Enterprise.

\$2.49