The Dayco Manufacturing Company had the following financial statement results for last year. Net sales were $1.2 million with net income of $90,000. Total assets at year end amounted to $900,000.
a. Calculate Dayco’s asset turnover ratio and its profit margin.
b. Show how the two ratios in Part a can be used to determine Dayco’s rate of return on assets.
c. Dayco operates in an industry whose industry ratios are these:
Return on assets: 9%; Asset turnover: 2.5 times; Net profit margin: 3.6%. Compare Dayco’s performance against the industry averages.