It won’t let me ask this question in the marketing section. So if you can somehow help me with that... thank you...
In 2014, Company A reported profits of about $52 billion on sales of $251 billion. For that same period, Company B posted a profit of about $22 billion on sales of $85 billion. So Company A is a better marketer, right? Sales and profits provide information to compare the profitability of these two competitors, but between these numbers is information regarding the efficiency of marketing efforts in creating those sales and profits. Using the following information from the companies' income statements (all numbers are in thousands), calculate profit margin, net marketing contribution, marketing return on sales (or marketing ROS), and marketing return on investment (or marketing ROI) for each company.
This is all the information I was given.
Company A Company B
Sales $250,670,000 $84,541,000
Gross Profit $68,872,000 $54,597,000
Marketing Expenses $8,421,750 $14,972,100
Net Income (Profit) $52,138,000 $21,705,000
We are required to calculate various ratios.
Profit margin is calculated by dividing Net profit by Net sales and is expressed in percentage
Net Profit (a)
Net profit margin (a/b)
So, we find that the profit margin of Company B is higher than Profit margin of company A
Now, we shall calculate the net marketing contribution
The net marketing contribution is calculated by subtracting the marketing expenses from the Gross profit of the companies.
Gross Profit (a)
Marketing expenses (b)
Net marketing contribution (a-b)
So, we find Company A has a higher Net marketing contribution than Company B
Next, we shall calculate the marketing return on sales.
It is calculated by dividing the marketing contribution by the net sales of the company.
Net marketing contribution (a)
Marketing return on sales (a/b)
Hence, we find that the Marketing return on sales of Company B is higher than mar...
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Sorry about that. What wasn’t helpful?