Miss

638 Words3 Pages
1. Compare and contrast a return on assets analysis versus a return on sales> which companies will benefit most from the former and why? ROA (short for return on assets) is a measure of a company’s profitability relative to total assets invested in the business by the owners. ROA = Net Income/Assets ROS (short for return on sales) on the other hand is a measure of a company’s overall operating efficiency. ROS =Net Income/Revenue Both ROA and ROS indicate the level of efficiency of the management. ROA indicates the efficiency of the management in making use of assets to create earnings, whereas, ROS indicates the efficiency of the management in using the sales dollar. In other words, ROS indicates the company’s…show more content…
Reference: http://www.theaustralian.news.com.au/business/story/0,28124,25489835-5018063,00.html 3. Compare and contrast the benefits and pitfalls of using cash management in a sales-incentive situation such as zero percent financing. Cash management tools aim at speeding-up the process of cash inflow and maximize its usage for companies. To boost sales, some companies offer zero percent financing to attract customers. As long as customers pay their balance within the allotted time, they pay only the actual principle associated with the product and no money towards interest, so it can be a good deal in such cases. The pitfall is that if customers don’t pay off their balance within the allotted time, a high interest rate is applied and they would have to pay much more for the product that what they ever thought they would. More often than not, companies offer zero percent financing on models with low sales and very rarely on pre-owned inventory. The companies that offer zero percent financing on their products do so to preserve and improve their cash position; however, they may yet be facing slower customer payments and reduced availability of funds from banks. With that being said, several customers who qualify for zero percent financing end up overpaying for the products because they don’t negotiate price

More about Miss

Get Access