Profit margin is calculated by dividing:Question 2Answera.sales by cost of sales.b.profit by total assetsc.profit by equityd.profit by net sales

Break Down the Problem

1. Identify the key components needed to calculate the profit margin.
2. Examine each answer choice to determine which corresponds to the correct formula for profit margin.

Relevant Concepts

• Profit Margin Formula: Profit margin is typically expressed as: $\text{Profit Margin} = \frac{\text{Profit}}{\text{Net Sales}} \times 100$

Analysis and Detail

1. Choice a: Sales by cost of sales - This reflects a different metric, commonly referred to as markup, not profit margin.
2. Choice b: Profit by total assets - This describes return on assets (ROA), not profit margin.
3. Choice c: Profit by equity - This aligns with return on equity (ROE), which is also incorrect for profit margin.
4. Choice d: Profit by net sales - This is the accurate definition of profit margin.

Verify and Summarize

The only answer among the options that correctly matches the definition and calculation of profit margin is:

• Choice d: profit by net sales.

Final Answer

d. profit by net sales