Deciding company to invest based on given data
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You are given the following data on two companies, M and N (figures are millions):
M N
Sales $1,080 $1,215
Net Income $54 $122
Investment $180 $405
Required:
a.Which company has the higher profit margin?
b.Which company has the higher investment turnover?
c.Based solely on the data given, in which firm would you prefer to invest?
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Solution Summary
Solution describes the steps in calculating profit margin, investment turnover ratios for M and N companies. Finally it shows the steps in computing return on investment to determine which is a better investment opportunity.
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a. Which company has the higher profit margin?
Profit Margin for company M = (Net Income/Sales)*100 = (54/1080) = 5.00%
Profit Margin for company N = (Net Income/Sales)*100 = (122/1215) = ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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