Profit margin is calculated by dividing:Question 2Answera.profit by equityb.sales by cost of sales.c.profit by total assetsd.profit by net sales.

Break Down the Problem

1. Identify what profit margin is and how it is typically calculated.
2. Evaluate the options given for the calculation of profit margin.

Relevant Concepts

Profit margin is a financial metric used to assess a company's profitability, calculated using the following formula: $\text{Profit Margin} = \frac{\text{Net Profit}}{\text{Net Sales}}$ where:

• Net Profit refers to the profit after all expenses have been deducted from total revenue.
• Net Sales refers to total sales minus returns, allowances, and discounts.

Analysis and Detail

1. Option a: profit by equity — This is not the correct representation of profit margin.
2. Option b: sales by cost of sales — This represents a different metric, not profit margin.
3. Option c: profit by total assets — This is indicative of return on assets, not profit margin.
4. Option d: profit by net sales — This aligns with the formula for profit margin.

Verify and Summarize

Among the four options, only Option d correctly represents the calculation of profit margin.

Final Answer

The correct answer is d. profit by net sales.