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Foundations of Business - Standalo...

4th Edition
William M. Pride + 2 others
ISBN: 9781285193946

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BuyFindarrow_forward

Foundations of Business - Standalo...

4th Edition
William M. Pride + 2 others
ISBN: 9781285193946
Textbook Problem

Explain the calculation procedures for and significance of each of the following:

  1. a. Return on sales.
  2. b. The current ratio.
  3. c. Inventory turnover.

Summary Introduction

To determine: Explaining the calculation procedures and significance of return on sales, the current ratio and inventory turnover.

Introduction: The current ratio or financial ratio that measures an organization's capacity to pay off its present obligations with current assets. Administration and outside clients examine this ratio to evaluate the liquidity of the organization and additionally its proficiency.

Explanation

The benefits of comparing a firm’s current financial information with information for previous accounting periods, with industry averages and with financial information for competitors are as follows:

  • Return for sales: Return for sales is a financial ratio figured by dividing net income after taxes by net sales. It demonstrates how adequately the firm is changing sales into revenues...

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