Question

Subject: BUSINESS POLICY

a. For each company listed below, compute Return on Sales (ROS),which reveals the portion of each revenue dollar that results in profit. ROS =Net income / Sales revenue.

($ in Millions)	Year Ended	Revenue	Net Income	ROS
Miscrosoft (MSFT)	6/30/2008	$60,420	$17,681	29.26%
Wal-Mart Stores (WMT)	1/31/2009	$405,607	$13,400
Ford Motor Company (F)	12/31/2008	$146,277	$(14,672)

b. Wal-Mart Stores has (greater /Iess) revenue than Microsoft, but Microsoft has a (higher / lower) ROS ratio than Wal-Mart. The ROS ratio for Microsoft indicates _____________ % of every revenue dollar resulted in profit (net income), but for Wal-Mart Stores only ____________ % of every revenue dollar resulted in profit. Ford Motor Company reports a (positive I negative) ROS,indicating (revenue / net income) is negative.

c. For Wal-Mart, _______________ cents of each revenue dollar went to pay for all of the costs of running the business, leaving _______________ cents of each revenue dollar for profit.

d. The corporation with the strongest ROSratio is (MSFT/ WMT/ F).

How can a company increase its ROSratio?

e. Does a low ROSratio indicate a weak corporation? (Yes/ No) Why?

Answer 1

Requirement 4a:

($ in Millions)	Year Ended	Revenue	Net Income	ROS = (Net income / Sales Revenue ) * 100
Microsoft (MSFT)	6/30/2008	$      60,420.00	$            17,681.00	29.26%
Wal-Mart Stores (WMT)	1/31/2009	$    405,607.00	$            13,400.00	3.30%
Ford Motor Company (F)	12/21/2008	$    146,277.00	$         (14,672.00)	-10.03%

4b: Wal-Mart stores have greater revenue than Microsoft, but Microsoft has a higher ROS ratio than Wal-Mart.

The ROS ratio for Microsoft indicates 29.26% of every revenue dollar resulted in profit (net Income), but for Wal-Mart stores

Only 3.30% of every revenue dollar resulted in profit. Ford motor company re[orts a Negative ROS, indicating Net income is Negative

4c: For Wal-Mart, .967 Cents of each revenue dollar went to pay for all the cost of running the business, leaving 0.033 cents of each revenue dollar for profit.

4d: The Corporation with the strongest ROS Ratio is MSFT

ROS ratio can be increased by Increasing Profit margin or Sales Revenue can also be increased

4e: Does a Low Ratio indicate a weak corporation: YES. Because it tells about Low returns on sale revenue,

It also indicates inefficiency in turning sales into profits,