Question

Juroe Company provided the following income statement for last year: Sales $11,600,000 Cost of goods sold...

Juroe Company provided the following income statement for last year:

Sales $11,600,000
Cost of goods sold 3,000,000
Gross margin $8,600,000
Operating expenses 3,800,000
Operating income $4,800,000
Interest expense 1,000,000
Income before taxes $3,800,000
Income taxes 1,400,000
Net income $2,400,000

Juroe's balance sheet as of December 31 last year showed total liabilities of $11,200,000, total equity of $6,450,000, and total assets of $17,650,000.

Required:

1. Calculate the return on sales. Round to two decimal places.
%

2. The return on sales ratio illustrates the number of cents from each sales dollar that is left over after covering Juroe Company's return on sales is____ %, which indicates that for every $1.00 of sales revenue it generates,  cents are left over after subtracting______ . Appropriate return on sales benchmarks vary by industry and economic conditions. However, generally speaking, a return on sales of____ cents is_____ .

Homework Answers

Answer #1

Return on sales is a way to see that how much the firm is earning or making profit froom the sales it has.

Formula = (EBIT / Net Sales)*100
*EBIT = Earning before Interest and Taxes

1. Return on Sales for the firm = (4800000/11600000)*100 = 41.38%

2. The return on sales ratio illustrates the number of cents from each sales dollar that is left over after covering Juroe Company's return on sales is 41.38 %, which indicates that for every $1.00 of sales revenue it generates,  cents are left over after subtracting $0.4138 . Appropriate return on sales benchmarks vary by industry and economic conditions. However, generally speaking, a return on sales of 100 cents is 25 .

**Note- You may find variety of ROS standards, as there is no such perfect general ROS benchmark.

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