Running Head: ANALYSIS1AnalysisInstitutional AffiliationDateANALYSIS2Question OneThe income statement may be used to determine the success or profitability of any businessusing some quick ratio tests of the business. These ratios may include:I.RETURN ON SALESThe Return on Sales (ROS) ratio tells you how efficiently your company runs itsoperations. Using the information on your income statement, you can measure how muchprofit your company produced per dollar of sales and how much extra cash you brought inper sale.You calculate ROS by dividing net income before taxes by sales.To determine whether that amount calls for a celebration, you need to find the ROS ratios forsimilar businesses.II.RETURN ON ASSETSThe Return on Assets (ROA) ratio tests how well youre using your companys assets togenerate profits. If your companys ROA is the same or higher than other similar companies,youre doing a good job of managing your assets.To calculate ROA, you divide net income by total assets. You find total assets on yourbalance sheet.Net income Total assets = Return on AssetsROA can vary significantly depending on the type of industry in which you operate. Forexample, if your business requires you to maintain lots of expensive equipment, such as aANALYSIS3manufacturing firm that requires large equipment, your ROA will be much lower than aservice business that doesnt need as many assets.III.RETURN ON EQUITYTo measure how s ...
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