Problem:

James builds brick walls for custom homes. His annual sales are approximately $300,000, and his net income is $18,000. He has assets of $100,000 invested in this business. Tom sells window shades. His annual sales are approximately $900,000, and his net income is $27,000. He has assets of $150,000 invested in his business.

Requirement:

Question 1: Compute the net profit margin for both James and Tom.

Question 2: Compute the asset turnover for both James and Tom.

Question 3: Compare the profitability of these two firms, and discuss the similarities and differences.

Note: Provide support for your underlying principle.