Читать книгу Accounting For Dummies - John A. Tracy - Страница 49

Investors use two important measures to judge a company’s annual profit performance. Here, we use the data from Figures 2-1 and 2-2 for the company. Of course, you can do the same ratio calculations for a product or service business. For convenience, the dollar amounts here are expressed in thousands:

 Return on sales = profit as a percent of annual sales revenue:$4.482 million bottom-line annual profit (net income) ÷ $71.064 million annual sales revenue = 6.3%

 Return on equity = profit as a percent of owners’ equity:$4.482 million bottom-line annual profit (net income) ÷ $15.959 million owners’ equity = 28.1%

Profit looks pretty thin compared with annual sales revenue. The company earns only 6.3 percent return on sales. In other words, 93.7 cents out of every sales dollar goes for expenses, and the company keeps only 6.3 cents for profit. (Many businesses earn 10 percent or higher return on sales.) However, when profit is compared with owners’ equity, things look much better. The business earns more than 28 percent profit on its owners’ equity. We’d bet you don’t have many investments earning 28 percent per year.