A firm earns a profit margin of 3.8 percent on sales of $436 million and employs net
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A firm earns a profit margin of 3.8 percent on sales of $436 million and employs net operating assets of $150 million to do so. It considers adding another product line that will earn a 4.8 percent profit margin with an asset turnover of 2.3.
What would be the effect on the firm’s return on net operating assets of adding the new product line?
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
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