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Sales Growth
Sales growth is an important driver of the need to invest in various types of assets and of the company’s value. Sales growth also provides some indication of the effectiveness of a firm’s strategy and product development activities, and of customer acceptance of a firm’s products and services.
Use the following questions to guide your analysis.
1. During the four-year period ended December 31, 2008, SciTronics’ sales grew at a _____% compound rate. There were no acquisition or divestitures.
Profitability Ratio: How Profitable Is the Company?
Profitability is a necessity over the long-run. It strongly influences (1) the company’s access to debt; (2) the valuation of the company’s common stock; (3) the willingness of management to issue stock; and (4) the capacity to self-finance. One measure of a company’s profitability is its return on sales, measured by dividing net income by net sales.
1. SciTronics’ profit as a percentage of sales in 2008 was ______ %.
2. This represented an increase/decrease from ______% in 2005.
Management and investors often are more interested in the return earned on the funds invested than in the level of profits as a percentage of sales. Companies operating in businesses requiring very little investment in assets often have low profit margins but earn very attractive returns on invested funds. Conversely, there are numerous examples of companies in very capital-intensive businesses that earn miserably low returns on invested funds, despite seemingly attractive profit margins.
Sales Growth
Sales growth is an important driver of the need to invest in various types of assets and of the company’s value. Sales growth also provides some indication of the effectiveness of a firm’s strategy and product development activities, and of customer acceptance of a firm’s products and services.
Use the following questions to guide your
Sales growth is an important driver of the need to invest in various types of assets and of the company’s value. Sales growth also provides some indication of the effectiveness of a firm’s strategy and product development activities, and of customer acceptance of a firm’s products and services.
Use the following questions to guide your analysis.
1. During the four-year period ended December 31, 2008, SciTronics’ sales grew at a _____% compound rate. There were no acquisition or divestitures.
Profitability Ratio: How Profitable Is the Company?
Profitability is a necessity over the long-run. It strongly influences (1) the company’s access to debt; (2) the valuation of the company’s common stock; (3) the willingness of management to issue stock; and (4) the capacity to self-finance. One measure of a company’s profitability is its return on sales, measured by dividing net income by net sales.
1. SciTronics’ profit as a percentage of sales in 2008 was ______ %.
2. This represented an increase/decrease from ______% in 2005.
Management and investors often are more interested in the return earned on the funds invested than in the level of profits as a percentage of sales. Companies operating in businesses requiring very little investment in assets often have low profit margins but earn very attractive returns on invested funds. Conversely, there are numerous examples of companies in very capital-intensive businesses that earn miserably low returns on invested funds, despite seemingly attractive profit margins.
Sales Growth
Sales growth is an important driver of the need to invest in various types of assets and of the company’s value. Sales growth also provides some indication of the effectiveness of a firm’s strategy and product development activities, and of customer acceptance of a firm’s products and services.
Use the following questions to guide your