The Dayco Manufacturing Company had the following financial statement results for last year. Net sales were $1.2 million with net income of $90,000. Total assets at year end amounted to $900,000.
a. Calculate Dayco's asset turnover ratio and its profit margin.
b. Show how the two ratios in Part (a) can be used to determine Dayco's rate of return on assets.
c. Dayco operates industry average ratios are these: Return on assets: 11 percent; Asset turnover: 2.5 times; Net profit margin: 3.6 percent. Compare Dayco's performance against the industry averages.