Excerpts from Hulkster Company's December 31, 2021 and 2020, financial statements are presented below: 2021 2020 Accounts receivable$40,000 $36,000 Merchandise inventory$28,000 35,000 Net sales 190,000 186,000 Cost of goods sold 114,000 108,000 Total assets 425,000 405,000 Total shareholders' equity 240,000 225,000 Net income 32,500 28,000 Hulkster's 2021 profit margin is (rounded): 17.1%. 13.5%. 4.5%. 7.6%.

Hulkster's 2021 profit margin is:

17.1%.

Explanation:

a) Data and Calculations:

                                                   2021          2020

Accounts receivable              $40,000     $36,000

Merchandise inventory         $28,000       35,000

Net sales                                190,000      186,000

Cost of goods sold                 114,000      108,000

Total assets                          425,000     405,000

Total shareholders' equity  240,000     225,000

Net income                            32,500        28,000

Profit margin = net income/net sales * 100

= $32,500/$190,000 * 100

= 17.1%

b) The profit margin of 17.1% indicates that Hulkster Company has generated an income of 17.1 cents for each dollar of sales.  It shows the company's income performance with relation to the net sales revenue.  It is a ratio of the net income expressed as a percentage of the sales.

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