Return on sales (ROS) is profit as a percentage of sales revenue. ROS indicates

Question

Return on sales (ROS) is profit as a percentage of sales revenue. ROS indicates how effective and efficient a company is in managing its resources. The table below provides data to compare the profitability of two competitors. Using the data in the table below, calculate the return on sales for each company. Which company is the better marketer as measured by return on sales?

A.) Company A because its ROS is lower.

B.) Company A because its ROS is higher.

C.) Company B because its ROS is lower.

D.) Company B because its ROS is higher.

E.) Both companies are equally effective as measured by ROS.

Company A Company B Total revenue Cost of Goods Sold Total Expenses $47,697,041 $8,594,792 $13,350,000 44,366,586 $7,829,322 $11,380,000

Explanation / Answer

Return on sales = (sales - expenses) / sales *100

Company A: (47697041 - 13350000) / 47697041*100 = 72.01%

Company B: (44366586 - 11380000) / 44366586 *100 = 74.35%

Correct choice Company B because its ROS is higher

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