Question

BTN 3-9 Samsung (Samsung.com) is a leading manufacturer of consumer electronic products. The followingselected information is available from Samsung’s financial statements along with those fromApple and Google.

In millions Samsung Apple Google

Net income . W 19,060,144 \( 53,394 \)16,348

Net sales . 200,653,482 233,715 74,989

Required

1. Compute profit margin for the current year for Samsung, Apple, and Google.

2. Which company has the higher profit margin? For that company, how much net income does it receivefor each $1 or W1 of sales

Short answer

Samsung: 9.49%

Apple: 0.01%

Google: 21.80%

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of profit margin

Profit margin shows the percentage of profit generated from revenue.

Calculation of profit margin

Samsung profit margin:

$$\begin{gathered} \mathbf{Profit}\mathbf{Margin}\mathbf{=}\frac{\mathbf{Net}\mathbf{Income}}{\mathbf{Net}\mathbf{Sales}}\mathbf{\times }\mathbf{100} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\$19,060,144}{\$200,653,482}\mathbf{\times }\mathbf{100} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{9}\mathbf{.}\mathbf{50}\mathbf{\%} \end{gathered}$$

Apple company:

role="math" localid="1653374662773" $$\begin{gathered} \mathbf{Profit}\mathbf{Margin}\mathbf{=}\frac{\mathbf{Net}\mathbf{Income}}{\mathbf{Net}\mathbf{Sales}}\mathbf{\times }\mathbf{100} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\$53,394}{\$482,233,715}\mathbf{\times }\mathbf{100} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{0}\mathbf{.}\mathbf{01}\mathbf{\%} \end{gathered}$$

Google Company:

$$\begin{gathered} \mathbf{Profit}\mathbf{Margin}\mathbf{=}\frac{\mathbf{Net}\mathbf{Income}}{\mathbf{Net}\mathbf{Sales}}\mathbf{\times }\mathbf{100} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\frac{\$16,348}{\$74,989}\mathbf{\times }\mathbf{100} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{21}\mathbf{.}\mathbf{80}\mathbf{\%} \end{gathered}$$